Rio Tinto Q1 iron ore output rises amid glut

(Adds CEO comment, copper details, UBS (NYSEArca: FBGX - news) forecast)

SYDNEY, April 21 (Reuters) - Rio Tinto (Xetra: 855018 - news) on Tuesday posted a sharp rise in quarterly iron ore output amid a push to capture more of the global market despite a mounting supply glut driving ore prices to 10-year lows.

The world's no. 2 producer after Vale increased production 12 percent in the first quarter from a year earlier, to 74.7 million tonnes, according to the company's latest operations report, in line with a forecast from UBS.

"By making best use of our high quality assets, low cost base and operating and commercial capability our aim is to protect our margins in the face of declining prices and maximise returns for shareholders throughout the cycle," Chief Executive Sam Walsh said in a statement.

Iron ore accounts for about 90 percent of Rio Tinto's overall earnings.

Rio Tinto stuck to its forecast that it expects to ship about 350 million tonnes from its Australian and Canadian operations, which would include drawing down inventories to help maximise cash flow.

The price of iron ore has crashed from highs of $130 a tonne at the start of last year to around $50 a tonne this week.

Rio Tinto's average cash cost of iron ore production was $19.50 a tonne in 2014, and is forecast at about $17 a tonne this year.

Goldman Sachs (NYSE: GS-PB - news) has said in a report that the market is so dire in iron ore for all but the top three miners that half the world's so-called "tier two" producers run the risk of closing.

Fortescue Metals Group Ltd, among Goldman's list of tier two miners, blames the price falls on Vale, Rio Tinto and fellow Australian producer BHP Billiton (NYSE: BBL - news) for flooding an already depressed market with hundreds of millions of tonnes of iron ore.

Rio Tinto is pushing ahead with plans to expand its Australian production to 350 million tonnes a year by 2017.

Walsh, speaking after the company's annual general meeting last week, said with iron ore selling for $50 a tonne, the company had to ensure "we maintain the margin between ourselves and the high-cost producers."

Rio's mined copper output fell 9 percent in the March quarter from a year earlier due to lower grades, which had been expected, at Rio's Kennecott mine in the United States.

The company still expects to produce between 190,000 and 220,000 tonnes of refined copper this year.

(Reporting by James Regan; Editing by Richard Pullin)