Rio Tinto Backs Annual Cash Costs Cut Target

(RTTNews) - Mining giant Rio Tinto Plc. (RTPPF.PK, RIO.L, RIO, RTNTF.PK) Tuesday said it is on track to meet its operating cash costs reduction target for 2013, adding that it has already reduced more than it had planned for the year in exploration and evaluation spend.

The company delivered $1.8 billion improvement in operating cash costs in the ten months to October and is on track to deliver the $2 billion target for 2013.

On the occasion of its investor seminar in Sydney today, the miner said it reduced $800 million in exploration and evaluation spend in these ten months, exceeding the target of $750 million for 2013.

Rio Tinto chief executive Sam Walsh said, ''"We have cut costs and are set to exceed our commitments made in February. Operating costs are down $1.8 billion year to date compared to the same period last year and exploration and evaluation costs are more than $800 million lower.''

The company forecasts total capital expenditure of less than $14 billion in 2013, a reduction of more than 20 percent compared to 2012. In August, Rio said it targets capital expenditure for 2013 to be around $14 billion, 20 percent lower than the peak capex of 2012.

Total capital expenditure is forecast to be reduced to $11 billion in 2014 and around $8 billion in 2015, reflecting a 20 percent reduction year-on-year.

Rio has announced or completed $3.3 billion of divestments of non-core assets in 2013 and proceeds of $2.3 billion have been received so far in such divestments.

The company has adopted a breakthrough low capital expenditure pathway to optimize West Australian iron ore growth from an annual production rate of 290 million tonnes a year or Mt/a to at least 330Mt/a in 2015. This at a capital cost of $120-$130 per tonne with an overall capex saving of more than $3 billion. Production is expected to reach more than 350 mt in 2017.

Aluminum has continued its transformation by reducing operating costs by over $450 million to the end of October, compared to 2012. The business has optimized its portfolio through the sale, suspension or curtailment of non-core assets.

''Over the longer term, I remain optimistic about demand for our products,'' Walsh stated, adding that China's urbanization would continue and the development of other economies such as India, Vietnam, Indonesia, the Philippines and the Middle East would also contribute to ongoing demand.

The stock closed down 0.6 percent on the ASX on Tuesday at A$65.49.