MINING titan Rio Tinto says it has already exceeded its target of cutting $2 billion in operating costs by the end of the year and said it will prioritise paying down debt next year.
Major resources companies such as Rio Tinto are moving to bolster their balance sheets and profits in the face of subdued prices for many commodities, as a decade-long mining boom cools.
Rio Tinto already announced plans to more than halve its capital expenditure to less than $8 billion by 2015 from last year’s level while its peer BHP Billiton announced plans to cut its capital spend below $15 billion in the future from $21.7 billion in the last financial year.
In an effort to boost profitability, mining companies are also slashing operating costs by reducing headcount, increasing production capacity at its operations, and revising supply contract agreements among other things. Rio Tinto announced in February plans to cut operating costs by $2 billion through such measures by the end of the year.
Chief executive officer Sam Walsh told analysts at an investor day presentation that the miner had already surpassed that target and remained on track to achieve $3 billion in operating cost savings next year compared with 2012.
“We are improving productivity and setting new production records and at the same time reducing our spend,” said Mr Walsh. “I’m certain that we are on the way to transforming Rio Tinto to the highest performer in the sector,” he added.
In exploration alone, the company already exceeded this year’s target of $750 million in cost savings by $50 million while in its energy division, the company has delivered $600 million in savings during the first 10 months of the year and has about 1500 initiatives to boost productivity across its uranium and coal mines in Australia, Africa and Canada.
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