Markets: Frugal Rio on track

Rio Tinto says it is on track to meet its cost-cutting targets after reducing its spend by nearly $US500 million in the first half compared to last year.

Rio Tinto shares jumped by as much as 1.7 per cent, wiping out earlier declines, after the miner said its spending in the first six months of this year was $US483 million less than 2012 amid record iron ore production in the Pilbara, despite flood waters in that region of Western Australia.

At 1540 AEST Rio shares were up 77 cents, or 1.4 per cent, to $55.54, after earlier falling as low as $54.44. The company reiterated it was on track to cut its spending in 2013 by $US750 million.

In an ASX statement the company said its pre-tax, pre-divestment on exploration and evaluation of mining projects charged to its profit and loss was $US542 million in the first half of this year compared with $US1.02 billion for the same period a year ago. Of its 2013 spending, 44 per cent was spent on its copper unit, 6 per cent on iron ore, 18 per cent on energy, 16 per cent on diamonds and minerals with the rest spent on Rio Tinto Alcan and other exploration.

Global iron ore production was 127.2 million tonnes in the first six months this year, up 6 per cent from last year. Global iron ore shipments rose 4 per cent from 2012 to 118.6 million tonnes. Copper mined jumped 17 per cent to 296.4 kilotonnes.

Sam Walsh, Rio’s chief executive, says the company is on track to increase its iron ore production in the Pilbara to 290 million tonnes per annum this year from 237 million tonnes.

But the company also says it plans to make a pre-tax provision of $US183 million. The Supreme Court of NSW said a royalty payment must be made by Rio to billionaire Gina Rinehart’s closely held iron ore company Hancock Prospecting and fellow iron ore mogul Angela Bennett’s closely held Wright Prospecting.

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