Dec. 12 (Bloomberg) -- Rio Tinto Group’s iron-ore unit in Canada will idle some production capacity next year and put an $800 million expansion on hold because of falling demand for the steelmaking ingredient.

Iron Ore Co. expects to produce at about 80 percent of capacity in 2009, Toronto-based Labrador Iron Ore Royalty Income Fund said in a statement released by Canada NewsWire. Labrador Iron Ore has a 15 percent stake in the company, Rio owns 59 percent and Tokyo-based Mitsubishi Corp. controls the remainder.

The announcement was made after London-based Rio said on Dec. 10 that it will eliminate 14,000 jobs and slash $5 billion in spending as the global recession curbs demand for metals. The Iron Ore Co. plant near Labrador City, in the Canadian province of Newfoundland and Labrador, can produce 17 million metric tons of iron ore in concentrate annually, according to unit’s Web site.

Labrador Iron Ore Chief Executive Officer Bruce Bone wasn’t immediately available to comment.

To contact the reporter on this story: Rob Delaney in Toronto at robdelaney@bloomberg.net.

Last Updated: December 12, 2008 18:15 EST