Rio to cut capex by $6bn in two years
Rio Tinto pledged to cut capital spending by at least 20 per cent in each of the next two years in an attempt to woo back investors dismayed by the miner’s misguided investments during the resources boom. The Anglo-Australian mining group said its capital expenditure would fall from $14bn this year to $11bn next year and to $8bn in 2015. The anticipated reductions come after Rio said last week that one of its biggest investment projects – to raise the output from its iron ore mines in Australia’s Pilbara region by almost a quarter – could be completed much more cheaply than previously predicted. Rio and many of its peers have been out of favour with shareholders after overspending on new projects and acquisitions. Rio’s Sam Walsh is one of many recently installed chief executives at leading miners, following a cull of previous leaders amid shareholder anger at industry underperformance. "We lost our way . . . we are taking decisive action," Mr Walsh said in Australia on Tuesday. "Don’t get me wrong, we do have more to do." Speaking at a seminar for Rio investors in Sydney, Mr Walsh also warned of continued "market fragility and volatility" because of concerns over central bank policies and austerity in some regions. "But it is a mixed story because despite this uncertainty we are also seeing modest economic recovery," he said. China’s government had assuaged some concerns by signalling that economic adjustment would be gradual "which reduced the likelihood of a sudden downturn", Mr Walsh said. Rio’s capital spending soared to more than $17bn last year, part of a splurge of investment in response to a period of strong demand for commodities led by China’s economic growth. The miner needs to cut spending and sell some marginal assets in order to try to maintain its credit rating after net debt rose to more than $19bn last year. It has been unable to sell some businesses, including some aluminium assets and its diamonds business, but has announced or completed $3.3bn of sales this year. Rio said it had cut spending on exploring and evaluating new projects by $800m this year, exceeding a $750m target.