Friday, December 12, 2008

Mining - Regional - Rio Tinto to lay off 14,000, cut debt, capex by billions

Multinational resource company Rio Tinto (LSE: RIO) said that in light of global downturn it will aim to slash its debt by US$10bn by the end of 2009, cut some 14,000 jobs worldwide and take other cost-containing measures.


Presently carrying some US$38.9bn in debt, Rio Tinto said in a statement that the decline of the global economy has moved with unprecedented swiftness and therefore has forced the company to take great steps to reduce spending and short-term loan takeouts.

Rio Tinto CEO Tom Albanese said that "given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximize cash generation and pay down debt. We have undertaken a thorough review of all our operations and are executing a range of actions."

In capital expenditures, the company said it expects to shave its budget from US$9bn to US$4bn in 2009, of which US$2bn will be sustaining capex.

"There will be impacts on projects across the board and stakeholder engagements are currently underway. Some projects will be cancelled and others deferred until markets recover. Further details will be provided to the market in the first quarter of 2009," read Rio Tinto's statement.

In jobs, Rio Tinto said it will lay off 14,000 employees globally - some 13% of its workforce - of which 8,500 will be contractors and 5,500 internal workers. The measure will allow the company to save US$1.2bn, although the group will have to pay US$400mn up front in severance expenses.

In relation to production guidance, Rio Tinto said it now expects to churn out 830,000t of copper in 2009.

Rio Tinto's Latin American assets include 30% of Chile's Escondida, the world's largest copper mine, the Corumbá iron ore mine in Brazil, borate assets in Argentina, and the La Granja copper project in Peru.



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