Rio to slash spending by more than AUD$5 billion
In a further sign that the global resources sector has reached a rough impasse diversified mining titan Rio Tinto (ASX:RIO) has announced that it will slash spending by more than AUD$5 billion over the next two years in response to dwindling demand.
Fairfax reports that Rio made the announcement this morning just prior to a discussions with key investors in Sydney today which are expected to revolve around its iron ore and diamond operations.
Rio's operating and support costs are set to decline by $4.81 billion by the end of 2014, while spending on exploration and assessment will fall by $1 billion throughout the remainder of 2012 and 2013.
News of the spending reductions arrives in the immediate wake of a swathe of job and cost cuts by Rio and its resources peers down under. Rio slashed jobs at its Queensland coal mines earlier this year in response to both depressed coal prices and increased royalty rates, while also pursuing retrenchments at its aluminum operations and plans to kill off its diamonds division.
Despite the huge cuts CEO Tom Albanese said that he was "cautiously optimistic" about the outlook for key export market China, seeing "green shoots" in its economy as well as the positive impact of government stimulus measures.
Rio has also recently given signs that it remains upbeat about key export commodity iron ore, and is still forging ahead with expansion of its iron ore exports from Western Australia's Pilbara region.
The company announced today that its expansion plans are well ahead of schedule, with export capacity set to increase by 7 million tonnes to 237 million tonnes per year.
According to Rio the capacity increases were achieved by means of improved efficiency measures which entailed minimal capital expenditures.
Image of Tom Albanese courtesy of PwC via Youtube