SHANGHAI Rio Tinto Plc, the worlds second-largest iron ore producer, is aiming to shave $7 billion in costs by the end of 2014 as it pushes ahead with expansions amid "current headwinds."
"We are taking further tough action to roll back the unsustainable cost increases of the past few years and maintaining a relentless focus on improving productivity," Rio Tinto chief executive officer Tom Albanese said during an investor seminar Thursday.
More than $5 billion in savings will be sought via the reduction of operating and support costs by the end of 2014. A $1-billion cut will be made on spending on exploration and evaluation projects during the 2012-13 period, while a $1-billion trim in capital expenditures has been planned, the London-based miner said. In addition, capital expenditures on approved and sustaining projects also will "taper off" from current levels in 2013.
Rio Tinto is guardedly optimistic on Chinas prospects and expects the countrys early signs of economic pickup to continue in 2013. It also foresees a slight rise in Chinas gross domestic product growth to above 8 percent next year despite uncertainties in the U.S. and European economies.
It remains positive about the market outlook in the longer term, with increasing urbanization in emerging markets, and reiterated its expectation of Chinas steel demand peaking at about 1 billion tonnes toward 2030.
Rio Tinto has expanded its Pilbara iron ore operations in Western Australia to 237 million tonnes per year from 230 million tonnes with minimal capital spent, is set to add another 53 million tonnes in 2013 and will further expand capacity to 360 million tonnes per year.
"The capital intensity of the Pilbara expansion program from 220 million tonnes per year to 360 million tonnes remains at the mid-$150-per-tonne level," the miner said.
A version of this article was first published by AMM sister publication Steel First.