RIO Tinto said yesterday that it aims to axe $7bn (£4.4bn) in costs over the next two years and sell more assets to cushion itself against weaker commodity prices, while at the same time beefing up output in its lucrative iron ore business.
The firm is the only global iron ore producer that has not slowed iron ore expansion plans, forging ahead with $21bn in mine, port and rail work to boost its Australian capacity.
“For me the theme for this year, next year and probably the extended period beyond that in this volatile environment will be everything having to do about cost control,” Rio chief executive Tom Albanese said.
The company said it is aiming to cut more than $5bn of operating and support costs by the end of 2014, and would cut spending on exploration and evaluation projects by $1bn over the rest of 2012 and 2013.
Much of the cost cuts would come in its coal and aluminium assets, Albanese said, adding that support costs in Australia had become the most expensive in the world, compared with five years ago when they were among the cheapest.
It also plans to cut spending on sustaining operations by more than $1bn in 2013.
Rio remained cautiously optimistic about a pick-up in growth in China, following recent stronger-than-expected economic data.
“More than a couple of months ago, I’m cautiously optimistic about the fact that we’re beginning to see green shoots in China,” Albanese said.
The company has generated $12bn from selling more than 20 assets since 2008 and expects to add to that next year.
City A.M. Reporter