RIO TINTO took the top spot on the FTSE 100 yesterday morning, after investors responded well to news of around 40 senior staff cuts from the miner’s iron ore headquarters in Western Australia.
The FTSE 100-listed firm’s shares rose two per cent to close at 2867.75p.
Chief executive Sam Walsh has made a swathe of cost cuts – which include slashing jobs – since his appointment in January, targeting savings of over $5bn (£3.3bn) by the end of 2014.
It is understood that there will be further redundancies across all divisions of the mining giant.
“We have today advised staff that we are making changes to the structure and shape in our iron ore business, so that it is better placed to fit the current business environment and outlook,” said Rio Tinto in a statement.
“As a result, a number of colleagues will be leaving the business and our priority is on supporting them through the process.”
Rio Tinto also benefitted yesterday from being put on Citigroup’s most favoured stock list. The broker has put a 12-month ‘buy’ recommendation and a target price of £40.00 per share on the miner due to its view that the company will rebalance from growth to yield and return more cash to shareholders.
However, Citigroup questioned whether Rio Tinto will continue with planned large capex projects such as expanding iron ore production to 360m tonnes per year, in light of Walsh’s cost-cutting programme.
“It seems the market expects Rio to proceed with the 360 project, and a push back or delay would, in our view, be positive for the share price in the short term,” said Citigroup.