BHP Billiton , the world's biggest mining company, forecast record iron ore production this year after quarterly output jumped by a fifth, shrugging off predictions that growth in top buyer China will slow this year.

China is the largest market for the vast volumes of the steel-making commodity as well as for copper, coal and other industrial minerals that BHP Billiton and rival Rio Tinto mine worldwide.

Data this week showed the world's second-largest economy grew at its weakest pace in 2-1/2 years in the fourth quarter and appeared headed for a sharper slowdown in the coming months, raising concerns over demand from Chinese steel mills.

These companies are pretty 'gung ho' on iron ore and I don't think they would be out there crazily expanding if they thought there was a chance the volumes might not find a home, said Mark Taylor an analyst for Morningstar in Sydney.

A modern-day industrial revolution underway in China is behind the optimism. More than 100 million rural Chinese are projected to settle in towns and cities in the next decade, requiring unprecedented amounts of steel for housing and infrastructure.

China's own supplies of iron ore are of a far lower quality than that from Australia and Brazil and also insufficient to keep up with demand.

BHP Billiton's report on Wednesday, which precedes its quarterly financial results due on February 8, showed a 22 percent rise in December-quarter iron ore output from a year earlier, roughly in line with expectations.

Only Brazil's Vale and Rio Tinto mine more iron ore each quarter, but BHP Billiton's production growth is running at about 10 times the rate of Rio Tinto.

BHP Billiton is starting from a lower base than its bigger rivals and has earmarked a large chunk of its five-year, $80 billion (52 billion pound) capital spending program to mine more ore, sharing its rivals' confidence in long-term Chinese demand.

Full year production is now forecast to marginally exceed prior guidance of 159 million tonnes per annum, BHP Billiton said in its December-quarter production report.

Rio Tinto on Tuesday reported near-flat production growth in iron ore for the fourth quarter, but it is still hitting fresh record production rates.

Australia's third-largest iron ore miner, Fortescue Metals Group , has unveiled plans to spend $8.4 billion to almost triple production to 155 million tonnes a year by mid-2013 from 55 million now, after the company reported a 19 percent rise in December-quarter iron ore output.

BHP Billiton and others mine ore from giant pits resembling excavation sites found in the 500,000-square-kilometer, or 190,000-square-mile, Pilbara district, the single largest source of iron ore in the world. Ore is simply churned up by bulldozers and carted in trucks to waiting open-topped rail cars.

A typical train is about one-and-a-half kilometres long and consists of 300 cars hauling 24,000 tonnes of ore each over hundreds of kilometres to freighters waiting in Indian Ocean ports. In December alone, one port -- Port Hedland -- shipped more than 16 million tonnes of ore to China.

They've made no secret about the fact that they will pump out as much as they possibly can because they have low cost assets so they make margins even if commodity prices correct from the current levels, said Prasad Patkar, a portfolio manager at Platypus Asset Management. They will pump out as much as they physically can and keep the market supplied.

RAINING CASH

Record iron ore volumes are helping to flood big miners with cash.

Based on analysts' forecasts, Rio Tinto is expected to report full-year 2011 earnings before interest and tax (EBIT) of around $23 billion, up from $21.1 billion a year ago.

BHP Billiton is tipped to show flat EBIT of $32 billion year-on-year for the year to June 30.

BHP Billiton, which also operates the world's biggest coking coal collieries in partnership with Mitsubishi Corp <8058.T> in northeastern Australia, posted a 9 percent rise in output in the December quarter from a year earlier. Coking coal is used to fuel furnaces in steel mills.

The company's copper output dropped 7 percent over the period to 280,300 tonnes, which included lower yields from its majority-owned Escondida mine in Chile, though that was slightly ahead of a UBS forecast of 265,000 tonnes.

Over the September quarter, copper production leapt 27 percent, as a strike at Escondida ended and the company's Olympic Dam mine in Australia yielded more metal.

Escondida's production is forecast to be marginally lower in 2011-12, but pick up after that as mining expands.

BHP Billiton, the world's second-largest copper producer after Chile's Codelco, also booked a near 700 percent increase in mineral resource tonnage at its Spence copper mine in Chile.

BHP Billiton shares were barely changed in morning trade.

(Additional reporting by Miranda Maxwell in MELBOURNE; Editing by Lincoln Feast and Mark Bendeich)