Rio Tinto has slashed 3,800 jobs internationally since July 2012 and another 3,000 roles have left with divested assets, in a bid to bring better value to shareholders according to Rio Tinto chief executive Sam Walsh.
Speaking at an investor seminar today in Sydney, Walsh said the company had delivered a US$1.8 billion improvement in operating cash costs in the ten months to October, and was on track to deliver the US$2 billion target for 2013.
“I have set a clear direction for the business to reignite our passion for delivering greater value for shareholders. Our results so far show we are taking decisive action, making tough decisions and advancing at pace,” Walsh said.
“We have cut costs and are set to exceed our commitments made in February. Operating costs are down $1.8 billion year to date compared to the same period last year and exploration and evaluation costs are more than $800 million lower.
“We are also improving productivity, setting new production records in many of our key businesses and bringing our Oyu Tolgoi and Pilbara 290Mt/a expansion growth projects online within budget and on time. And we are delivering exceptional value from our growth opportunities, by continually optimising and improving our mine planning to generate the best returns.
“Our capex is reducing, and will come down further, to around $11 billion next year.
Other company highlights include:
• Breakthrough low capital expenditure pathway to optimise West Australian iron ore growth from an annual production rate of 290 million tonnes a year (Mt/a) to at least 330Mt/a in 2015, at a capital cost of $120-$130 per tonne with an overall capex saving of more than US$3 billion. Production will reach more than 350mt in 2017.
• Aluminium continuing its transformation by reducing operating costs by more than $450m to the end of October 2013, compared to 2012, and optimising its portfolio through the sale, suspension or curtailment of non-core assets.
• Focusing on a bauxite operation in Gove as part of a comprehensive engagement plan with the Northern Territory and Australian Governments and regional community following last month’s decision to suspend operations at the alumina refinery.
• Shaping a tier one copper portfolio, by delivering US$1.8 billion of divestments, and focusing on four long-life and low-cost operating assets and a phased approach to developing two world-class greenfield projects.
“While there is always more to do I am confident we are well on the way to transforming Rio Tinto into the highest performer in our sector. A company respected for delivering value and immensely proud to contribute to the economies around the world wherever we operate.
“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. But it is a mixed story because, despite this uncertainty, we are also seeing modest economic recovery.
“In China, the decisions from the government’s Third Plenary Session last month reflect an ambitious yet pragmatic approach to continued reform and confirmed our expectation of gradual change which reduces the likelihood of a sudden downturn.
“Over the longer term, I remain optimistic about demand for our products. China’s urbanisation will continue and the development of other economies as they continue to grow at pace, such as India, Vietnam, Indonesia, the Philippines, the Middle East, the former Soviet Union, South America and Africa, will also contribute to ongoing demand for our products.
“Therefore, the outlook for our business is robust and we are strengthening our ability to capitalise on opportunities available to us in the future.”
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