Rio Tinto Ltd/Plc, the world's second-largest iron ore miner, is still keen to work with China's state-owned Chinalco and both companies have held talks recently, Rio CEO Tom Albanese said on Tuesday.

Albanese also told a business luncheon in Perth that long-term demand for iron ore remained strong, especially from China, and its operations in the Pilbara region of Western Australia are running at maximum capacity.

We are still keen to work with Chinalco in the future on projects of mutual benefit. It's too early to say what these might be, but I am encouraged that we've had some recent engagement, he said, without giving details.

Rio is looking to mend relations with Chinalco ALUMI.UL by making a joint investment in Mongolia's Oyu Tolgoi copper-gold mine project, an Australian newspaper reported late last month.

Rio's relations with Chinalco soured early in July after it snubbed Chincalco's offer for a bigger equity partnership that would have seen the Chinese group invest another $19.5 billion. Rio later opted to form an iron ore joint venture with rival BHP Billiton Ltd.

Rio reiterated its plans to boost its iron ore production in Australia to 330 million tonnes per year (mtpy) in 2015, compared with the current 220 mtpy.

However, Albanese said lingering uncertainty about the strength and duration of the recent pick-up in demand means that it would remain cautious when ramping up production, particularly in the United States.

He also said Australia needs to encourage Chinese investments in the country's huge stores of resources, failing which, the resource-hungry nation would venture elsewhere.

And it is already happening -- China has announced at least $33 billion in acquisition and development initiatives in African resources over the past few years. There is also Latin America, he said.

(Reporting by Fayen Wong; Editing by Muralikumar Anantharaman)

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