Rio Tinto has seen profits collapse by 80% to $806m as the falling price of iron ore and slowing demand from China hammered the mining giant.

Results for the first half also showed underlying earnings plummet 43% to $2.9bn.

Rio Tinto chief executive Sam Walsh said: "For some time it's been apparent that the economic environment has been adjusting to what is now called 'the new normal'.

"But let's be clear - we'll see continued economic growth from this larger base including an increase in the long-term demand for all of our commodities."

The price of iron ore has fallen by nearly 40% and the company is reducing costs in order to make up the shortfall in income.

Rio Tinto said that it has already reduced costs by more than $500m.

Major mining firms are readjusting to a slowdown in demand for commodities in China as the country's economic growth slows.

Nevertheless, the firm added that it expects to return more than $6bn to shareholders this year.