Anglo-Australian mining giant Rio Tinto will slash thousands of jobs globally to cut its debt by US$10 billion as it battles falling mineral prices and a worldwide slowdown, it said on Wednesday.?
The company said it would cut 8,500 contractor and 5,500 employee roles, as well as reduce spending and sell assets, to lower its debt by the end of 2009 to counter the speed and severity of the global financial crisis.
"Given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximise cash generation and pay down debt," chief executive Tom Albanese said.
"We will minimise our operating and capital costs to appropriately low levels until we see credible and meaningful signs of a recovery in our markets, but will retain our strategic growth options," he said in a statement.
"By taking these tough decisions now we will be well positioned when the recovery comes."
The global miner, which had been the object of a hostile takeover bid by BHP Billiton until the rival walked away from the deal last month, said it will reduce its net capital expenditure for 2009 from US$9 to US$4 billion.
"There will be impacts on projects across the board and stakeholder engagements are currently underway," the company said in a statement.
"Some projects will be cancelled and others deferred until markets recover."
The group will also reduce operating costs by at least US$2.5 billion per annum in 2010 and expand the scope of assets targeted for divestment, it said.
Asset sales of up to US$15 billion had already been slated by the company, but Rio said Wednesday this would be broadened to include "significant assets not previously highlighted for sale" without elaborating.
It was already in discussions with third parties on this issue, it added.
Rio, which employs 97,000 workers around the world including 17,000 in Australia and significant numbers in North and South America and Africa, did not specify where the job cuts, designed to produce annual cost savings of US$1.2 billion, would be located.
But it said there would be a consolidation of offices around the group, a rapid acceleration of out-sourcing of IT and procurement and a deferral of exploration and evaluation expenditure.
BHP, the world's biggest miner, walked away from its long-running campaign for Rio in late November, blaming the deepening financial crisis and falling commodity prices and citing Rio's debt levels as one concern.
Rio said its net debt was US$38.9 billion by October, down US$3.2 billion from June 30, 2008. Much of this relates to the company's US$38 billion acquisition of Canadian aluminium producer Alcan in 2007.
Albanese said while reducing debt was a key priority, the company did not have "any current need to raise equity."
Rio, the world's third biggest miner, said it was confident that the industrialisation of developing economies would continue to drive demand for metals and minerals in future years.
"The purpose of these measures announced today is to ensure that the group is well positioned to exploit this underlying trend when the global economy recovers," it said.
(Agencies via China Daily December 11, 2008)
