Rio Tinto to invest $338 million in Silvergrass iron ore mine

(Reuters) - Rio Tinto Plc/Ltd (RIO.AX) (RIO.L) said on Tuesday it would invest $338 million (£255.27 million) to complete the development of its Silvergrass iron ore mine in Western Australia.

The company, which aims to produce about 350 million tonnes of iron ore this year, said the mine would add about 10 million tonnes of capacity.

A massive global supply glut has dragged prices of iron ore to record lows, with producers such as Rio Tinto and BHP Billiton Plc/Ltd (BHP.AX) (BLT.L) slow to cut production in order to stem supply.

The Silvergrass mine is part of Rio Tinto's Pilbara operations, which make up the vast majority of the miner's iron ore production.

Rio's situation has eased in recent months as the company has paid down debt and benefited from a recovery in commodity prices.

Some of the financial pressure is off, but there is no growth implied. (The investment) is maintaining stability," said Hunter Hillcoat, an analyst at Investec in London.

The company's shares were down 1.4 percent at 2450p on the London Stock Exchange, underperforming a 0.7 percent fall in the UK mining sector .

(Reporting by Mamidipudi Soumithri in Bengaluru and Barbara Lewis in London; Editing by Ted Kerr and Saumyadeb Chakrabarty)