SYDNEY: Mining giant Rio Tinto on Wednesday said iron ore production reached record levels in the third quarter, defying the global downturn and frictions with key market China.

The Anglo-Australian company said iron ore production was up 12 percent in the third quarter compared to a year earlier, setting a new quarterly record, with sales to China "maintained at a high level".

"We are seeing early signs of a recovery in some of our key markets, although we remain cautious about the near-term outlook," chief executive Tom Albanese said in Rio's third-quarter operations review.

"Our businesses continue to operate efficiently: iron ore production set a new quarterly record, with shipments to China maintained at a high level."

Rio raised its 2009 iron ore production guidance to 210-215 million tons, up from 200 million tons. Production in Australia's Pilbara region soared 18 percent on-year with mines consistently operating above capacity, it said.

Rio's relationship with China hit trouble in July when senior executive Stern Hu was detained in Shanghai and accused of spying, and later charged with industrial espionage.

Rio denies accusations that Hu bribed steel mill officials during failed talks aimed at setting annual iron ore prices. But it insisted that shipments to China were unaffected.

The arrest came just weeks after Rio snubbed a 19.5 billion US dollar cash injection from China's Chinalco in favour of a major rights issue and iron ore joint venture with fierce rival BHP Billiton.

Iron ore chief executive Sam Walsh said Rio had not resumed iron talks with China and was not sure when they would return to the negotiating table. But he said Rio had seen "very strong demand from all markets", including China.

"Certainly Chinese demand has been very strong but we have also had a pick-up across each of the other markets -- Japan, Korea, Taiwan, Europe and North America," Walsh told Dow Jones Newswires.

"So we are pretty pleased at the way markets have picked up."

Rio, which this month struck a multi-billion dollar agreement to mine one of the world's richest copper deposits in Mongolia, also said copper production was up 24 percent.

But aluminium production was four percent lower because of falling demand. Rio also said it had sold assets totalling 4.1 billion US dollars and used 14.8 billion dollars from the rights issue to pay down debt.

"We also benefited from higher third quarter production at all of our copper operations compared with last year," Albanese said.

"Cost reductions continue apace and we have made considerable progress on divestments this quarter enabling us to further reduce net debt."

Rio in August reported a 65 percent slump in half-year profits, blaming a sharp drop in commodity prices. Its share price rose 1.7 percent to close at 63.25 Australian dollars on the Sydney stock market.