Rio Tinto sets cost-cut targets as new mine projects move ahead
For projects started during the now-defunct mining boom, unchecked costs have become a No. 1 priority for resource companies facing a less robust customer in China, the world's biggest importer of iron ore, copper and other industrial staples.
"My streamlined executive committee structure is now in place and demanding targets for 2013, including for cash cost savings," CEO Sam Walsh said in a statement.
Walsh was named chief executive in January as part of a senior level shake up after a series of disastrous investments drove Rio Tinto to its first annual loss ever.
No details of the targets were given in the statement. Rio Tinto's emphasis on the cuts come after China's announcement on Monday its economy undershot expectations by growing 7.7 percent in the first quarter from a year ago, a stumble that battered global markets and forced analysts to slash the country's full-year growth forecasts.
Under Walsh, Rio Tinto has already cut hundreds of jobs and marked underperforming copper, coal and aluminium assets for sale or closure.
The world's second-biggest iron ore miner after Brazil's Vale said in its quarterly production report it remained on track to boost output of the steelmaking material to 265 million tonnes this year under a multi-billion-dollar expansion plan.
It also warned its mine in Utah, the second-biggest source of copper in the United States, would see a drop in refined metal output by about 100,000 tonnes based on an early assessment of damage caused by a cave-in last Wednesday.
The loss due to the accident, in which no employees were reported injured, could help ease a mounting global supply glut of copper that was weighing on the metal's price, according to analysts, although Rio Tinto's warning did not impact the price of the metal significantly on Tuesday amid steep volatility in global commodities markets.
Rio Tinto was also hopeful it could commission its giant Oyu Tolgoi copper and gold mine in Mongolia by the end of June, pending resolution of outstanding issues with the Mongolian government over local employment and taxes.
It has also failed to resolve cost disputes with Mongolia over how much the project will cost, agreeing only on a temporary budget to keep the mine on track to start producing in June.
Mongolia's representatives on the Oyu Tolgoi board refused to approve the mine's budget for this year in January, pressing Rio Tinto to explain why capital spending on the project had blown out by more than $2 billion (1 billion pounds). Rio Tinto has said that figure is incorrect and the project remains on budget of $6.2 billion.
IRON ORE, COAL
Iron ore production in the first quarter was 5 percent lower than fourth-quarter 2012 production after three tropical cyclones interrupted ship loading.
"Despite this temporary closure of the ports for shipping, the mine sites, and rail haulage from mine to port, continued to operate at close to capacity throughout the period," the company said.
Rio Tinto also has trimmed its Australian thermal coal production guidance for 2013 by 500,000 tonnes.
Coal prices have dropped dramatically this year, with demand from Asia waning as more power suppliers switch to gas, the outlook for thermal coal is souring. Australian producers have been particularly hard hit due to the high value of the Australian dollar and steep wages.
Rio Tinto has reportedly hired Deutsche Bank to find a buyer for a stake in its Coal & Allied unit in Australia.
Any sale, however, is unlikely to make up the $14 billion in writedowns on aluminium tied to its acquisition of Alcan of Canada and coal mines in Mozambique that led to a 2012 net loss of $2.99 billion. (Reporting by James Regan; Editing by Muralikumar Anantharaman)
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