Rio: Thousands to lose jobs, expenditure cut

RIO Tinto will slash 14,000 jobs and cut 2009 net capital expenditure guidance by $US5 billion ($A7.6 billion).
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Staff Reporter

In an announcement released soon after the Australian market closed yesterday Rio said the cuts were in response to the “unprecedented rapidity and severity of the global economic downturn”

The developments follow on from the grim economic outlook expressed in Rio’s third-quarter report.

“Since that time, demand conditions have worsened further, and as a result the group’s priorities have reoriented around conserving cash flow and reducing near-term borrowings,” Rio said.

Rio declared debt reduction a “key priority” and said it aimed to reduce its net debt by $US10 billion by the end of 2009.

As part of this strategy, it will seek to refinance its Alcan facilities in the term market.

The company’s debt, as at October 31, stood at $38.9 billion.

Globally, Rio will let go 14,000 workers, comprising 8500 contractors and 5500 employees.

Meanwhile, in a further effort to cut costs and raise cash, the company is in discussions with third parties over potential asset divestments and possible investment options.

Rio will also defer exploration expenditure.

Total capital expenditure is forecast to be cut by more than $5 billion, from over $9 billion to $4 billion.

Detailing the reasons behind the drastic measures, Rio chief executive Tom Albanese said the company hoped to position itself for a future turnaround.

“We will minimise our operating and capital costs to appropriately low levels until we see credible and meaningful signs of a recovery in our markets, but will retain our strategic growth options,” he said.

“We will expand further the scope of assets we are targeting for divestment.

“By taking these tough decisions now we will be well positioned when the recovery comes.”

Rio coal division acting communications and media manager Nathan Scholz told International Longwall News this morning there will be impacts on the company’s projects across the board and stakeholder engagements are currently underway.

“Some projects will be cancelled and others deferred until markets recover,” he said.

“Further detail will be provided in the first quarter of 2009.”

Shares in Rio Tinto are trading up over 7% this morning at $40.10 after rising 12% yesterday.