Rio Tinto reduces aluminium expenditure

Rio Tinto have boasted a $45 million reduction in sustaining capital expenditure for their Aluminium product group, as well $300 million worth of cash cost improvements to the end of 2015.

The company anticipates further improvements in 2016, with increases in bauxite, alumina and aluminium output.

Bauxite is expected to increase by four per cent to 45 million tonnes per year, alumina by three per cent to eight million tonnes, and aluminium by ten per cent to 3.6 million tonnes.

The recent announcement of the Amrun project in Northern Queensland, due to come online in 2019, will represent a further projected boost to the Rio Tinto Aluminium business.

Amrun will require $1.9 million in capital investment with an anticipated return of 20 per cent, thanks to more than of the future output already committed on off-take agreements.

Rio Tinto Aluminium chief executive Alf Barrios said the company had made significant advances in transforming their Aluminium business, thanks to “exceptional bauxite deposits and world-class aluminium smelting capacity”.

“There are short-term challenges, but aluminium is a metal in increasing demand which will bring the market into balance,” he said.

“Our value-added, low-carbon aluminium has a strong market position, enabling us to capture additional margin and premium throughout the cycle.

“With the development of Amrun, we are able to grow our high-quality bauxite output into rising market demand.

“We are creating real value as we work through the restructure of the business. We will continue to be relentless on cash generation across the business.

“Our drive for lower costs, efficient working capital, higher productivity, and improved product margins will help deliver sustainable value and cash returns for Rio Tinto shareholders through the cycle.”

Rio Tinto chief executive Sam Walsh shared Barrios’ optimism for the aluminium business through the current period of market volatility, indicating confidence in their balance sheet.

“With all of our investment decisions framed by the need to deliver value for shareholders, we have remained focused on investing in only the best quality projects,” he said.

“Our business is built around long-life, low-cost expandable assets that are complemented by best-in-class operational and commercial expertise.

“As we approach the start of 2016, we are well positioned to continue to provide returns for our shareholders and invest in our business.”

Rio has forecast total capex of $5 billion in 2016, compared with previous forecasts of $6 billion and in line with the present 2015 capex of $5 billion.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.