Rio Tinto to cut costs by $5 billion by 2014

Anglo Australian miner Rio Tinto, yesterday said that it plans to cut costs by $5 billion over the next two years amid a slowing global demand and plunging commodity prices.

Ahead of a series of investor briefings in Sydney, Rio chief executive Tom Albanese said, "We are taking further tough action to roll back the unsustainable cost increases of the past few years and are maintaining a relentless focus on improving productivity,'' said  Rio Tinto chief executive Tom Albanese.

London-based Rio Tinto said it would cut spending  in its Australian coal and aluminium business. It will also slash spending on  exploration and evaluation projects by $1 billion until 2013.

Rio Tinto will cut spending on iron ore expansion plans and will push ahead with its $21 billion plan of expanding mine, port and rail work in order to boost its Australian capacity to 353 million tonnes a year by the first half of 2015.

''We are investing in the highest returning opportunities, delivering major projects on time and are taking advantage of the inbuilt flexibility in our phased investment programmes. We have the ability to respond to changing market conditions and I am confident we have the right strategy to maximise shareholder value in the long term," Albanese said. 

Justifying the huge costs, Albanese said that post expansion, its cost per tonne of iron ore would be less than the present $47 a tonne delivered to China, including royalties, shipping and sustaining capital costs.