Rio targets $1B of savings

RIO Tinto’s energy division is on target to deliver another $1 billion in cost savings despite reducing unit costs of coal production by 25% in the last 12 months.
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Rio Tinto’s energy chief executive, Harry Kenyon-Slaney

Lou Caruana

Rio Tinto Energy chief executive Harry Kenyon-Slaney told a recent conference that the company, which had increased coal production by 10% in the last year, was comprehensively reviewing costs at all of its operations.

“We have set ourselves a target to deliver $1 billion in cost savings by the end of 2014,” he said.

“We’ve established a war room to tackle costs – focusing on streamlining maintenance procedures, consolidating contractors and improving procurement practices and cutting wastage.”

Kenyon-Slaney said while the cost savings to date had been significant, the company would be persevering with paring back costs in the current year.

“This is a truly significant step-change in the competitiveness of our business and we’re not done yet,” he said.

“With the exception of the health and safety of our people nothing is off limits.

“And yet the truth is the energy industry remains challenged, times are tough and we must continue to improve our business to remain viable.”

A ramp-up of coal production from Rio Tinto’s Kestrel longwall mine in Queensland last year could not prevent an annual decline in both revenues and net earnings for the company’s Australian coal production group.

Rio Tinto Coal Australia’s revenues for 2013 came in at $US4.4 billion ($A4.9 billion), about 10% lower than the $4.9 billion reported in 2012, while net earnings for the year were $367 million – well down on the $402 million for 2012.

Kestrel was the company’s star hard coking coal performer, with its fourth-quarter production soaring 300% on the previous corresponding period with the help of the newly completed $2 billion extension project.

The mine, which produced 608,000 tonnes in the quarter, had its life extended 20 years with the project expansion, which officially opened in October.

Construction work for Kestrel’s mine life extension project started in 2008 and the resulting Kestrel South longwall operation is expected to hit its full capacity by the end of 2014, averaging 5.7 million tonnes per annum of production over the next two decades.

Overall Rio Tinto Coal Australia’s hard coking coal production from its Kestrel and Hail Creek mines was up by 23% to 2.2Mt for the quarter.