Finance Finance News Rio Tinto to slash spending

Rio Tinto to slash spending

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Rio Tinto has announced it will slash capital expenditure by nearly half from $US14 billion ($A15.42 billion) currently to $8 billion by 2015 in what it says it good news for shareholders.

The global miner also told an investor seminar in Sydney that it was cutting costs quicker than expected this year as chief executive Sam Walsh warned of market fragility and volatility around the world.

The global miner’s frugal focus would enable capital expenditure to fall by an expected 20 per cent this year to $14 billion.

It was then forecast to fall by another $US3 billion to $US11 billion next year and about $US8 billion in 2015, reflecting a 20 per cent reduction year-on-year for three consecutive years.

The company outlined a delayed but lower cost expansion of its top earning iron ore business last week and said it would close its loss-making Gove alumina refinery in the Northern Territory, where 1,500 people are employed.

Rio had already cut $US1.8 billion in operating cash costs in the 10 months to October and was on track to deliver the $US2 billion target for 2013.

It had cut $US800 million out of its exploration and evaluation spend in the 10 months to October, exceeding the 2013 target of $US750 million.

On top of that, it has announced $US3.3 billion in divestments of non-core assets.

The cost cutting has reduced Rio’s employees numbers by 3,800, including the 1,800 new roles supporting its iron ore expansions, with another 3,000 roles going with its divested assets.

Rio’s shareholders could enjoy better free cash flow and greater returns, Mr Walsh said.

“I have set a clear direction for the business to reignite our passion for delivering greater value for shareholders,” he said.

“From where I stand, we continue to see market fragility and volatility.

“The impacts of decisions like quantitative easing and austerity programmes are still washing through markets around the world.”

He remained optimistic about demand for Rio’s products due to demand from emerging economies.

Rio shares were 42.5 cents down at $65.425 at noon.