Rio Tinto flags a further 20 per cent cut in spending

Rio Tinto has revealed 3800 jobs have been shed across its business since June 2012 as the company says it is making tough decisions to deliver greater value to shareholders.

An investor seminar in Sydney today outlined the company’s results achieved year-to-date, with Rio discussing the steps it has taken to cut costs and improve productivity.

After posting its first ever full year loss of $3 billion in February the miner announced it would look to take drastic cost cutting measures across the business.

Rio said it had delivered a $US1.8 billion improvement in operating cash costs in the 10 months to October and was on track to deliver the $US2 billion target for 2013

The company also revealed a $US800 million reduction in exploration and evaluation spend which exceeds the 2013 target of $US750 million.

However, further cuts are coming with capital spending to be reduced from $11 billion in 2014 to $8 billion in 2015.

“I have set a clear direction for the business to reignite our passion for delivering greater value for shareholders, CEO Sam Walsh said.

“Our results so far show we are taking decisive action, making tough decisions and advancing at pace.”

Walsh also confirmed an aggressive approach to selling the company's non-core assets, with proceeds of these to date reaching US$2.3 billion.

These include the recent sale of a stake in Constellium for US$315 million and the sale of Northparkes for final cash proceeds of US$820 million.

While the company said the sale of Clermont is making good progress and is on track to close in early 2014.

3000 roles have left the business due to the divestment of assets, while 3800 have left the group since June 2012 after taking into account 1800 new roles to support iron ore expansions.

Walsh said the outlook for the company is “robust” but stated that market fragility and volatility persisted.

“The impacts of decisions like quantitative easing and austerity programmes are still washing through markets around the world,” Walsh said.

However he said it was a “mixed story” because despite uncertainty, there were signs of “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," he said.

"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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