Rio plans to cut costs after saving $0.5b

9 Oct 2012, 7:00 pm   -   Source: AAP

Mining giant Rio Tinto to slash costs further after making savings of $500 million a year in operating, evaluation and capital costs

Mining giant Rio Tinto plans to cut costs further after already making annual savings of $500 million.

Despite continuing short-term market volatility, the global miner said its business remained healthy.

Rio is planning further cost reductions in operating, evaluation and sustaining capital costs.

Chief executive Tom Albanese said while significant stimulus efforts had been announced in China, the US and Europe, the impact on Rio Tinto's markets was uncertain.

"Given this, and the considerable price fluctuations in recent times, we are somewhat more cautious on the outlook over the next few quarters," Mr Albanese said in a statement.

"Our business remains resilient in this environment and our operations are performing better than our peers, reflecting our consistent strategy of running long-term, cost-competitive operations."

The company aims to maintain its single A credit rating by driving cost reductions.

Rio also lowered its estimates for Chinese gross domestic product growth this year to below eight per cent as economic growth in China moderates.

The company said the short-term macroeconomic outlook remained volatile while increasing urbanisation in emerging markets meant the longer-term picture was positive.

Rio Tinto expects China's stimulus packages to take effect progressively after the Chinese leadership change.

Iron ore prices had partially recovered after a period of rapid decline, but they would remain volatile in the near future, the company said.

Analysis by the company suggested that around 100 million tonnes of primarily Chinese iron ore production had become unprofitable and there was also evidence that a large proportion of this had already been curtailed.

Rio Tinto expects to achieve a cumulative annual growth rate for copper of 13 per cent between 2011 and 2015.

Despite a volatile short-term outlook for copper, production was expected to increase from 2013 as a result of improving grades and investments at Kennecott and Escondida and by the start of production from the Oyu Tolgoi mine in Mongolia, the company said.

Rio Tinto added that negotiations with Chinese authorities on a power purchase agreement (PPA) for the Oyu Tolgoi Project were actively progressing and the company remained optimistic and the company was optimistic about achieving a final PPA.

It comes as BHP Billiton continues to slash costs in a subdued environment as it meets with workers in Perth this week about likely job cuts.

AAP understands about 200 workers in its iron ore division are set to be made redundant, mostly in Perth.

The latest move follows the loss of thousands of jobs in Australia's resources industry, amid China-driven price falls in commodities such as iron ore and coal with Fortescue Metals particularly hard hit.

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