Rio Tinto commits to reduce net debt by 10 billion by end

first_imgRio’s key initiatives and commitments include the  reduction of net capital expenditure guidance for 2009 from over $9 billion to $4 billion, while retaining future growth options. Capital expenditure is to be reduced to sustaining levels in 2010, “absent an improvement in expected commodity market conditions.” There is also a commitment to reduce controllable operating costs by at least $2.5 billion/y in 2010.Rio Tinto has announced a detailed package of measures in response to the unprecedented rapidity and severity of the global economic downturn, which has caused sharp falls in commodity prices and a significantly weaker outlook. The initiatives are aimed at preserving value by conserving cashflow and reducing levels of debt.In its third quarter operations review, Rio acknowledged that the economic outlook had substantially deteriorated, that demand conditions had weakened sharply, and that capital expenditure would be reviewed. Since that time, demand conditions have worsened further, and as a result the Group’s priorities have reoriented around conserving cashflow and reducing near term borrowings.The Group’s net debt has reduced by $3.2 billion in the period from 30 June to 31 October 2008 to $38.9 billion. The Group is committed to reducing further net debt by $10 billion by the end of 2009.The Group is expanding the scope of assets targeted for divestment to include significant assets not previously highlighted for sale. The Group is also working actively on measures to generate cash from joint ventures on its existing assets and projects.Rio Tinto remains committed to its strategy of finding, developing and operating large, long life, low cost mining assets, which are cash generative at all points of the economic cycle. Rio Tinto’s existing portfolio of world-class, tier one assets continues to deliver strong cashflows in the current environment and provides the Group with optionality in terms of alliances and divestments.The Group maintains its belief that the industrialisation of developing economies with large populations will support much higher levels of metals and minerals demand worldwide in future years. The purpose of these measures announced today is to ensure that the Group is well positioned to exploit this underlying trend when the global economy recovers. With its superior suite of assets, and a stronger balance sheet, Rio Tinto will be able to resume its growth programmes with renewed momentum.Tom Albanese, chief executive, Rio Tinto, said “Given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximise cash generation and pay down debt. We have undertaken a thorough review of all our operations and are executing a range of actions. “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. 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.”“Notwithstanding the current financial turmoil, we continue to enjoy a suite of key assets which operate in the lower half of the cost curve in their industries, and our suite of growth assets remains capable of re-activation as soon as market conditions justify.”last_img

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