Australia Markets closed

Rio flags job losses in coal and aluminium


Rio Tinto has flagged job losses at its coal and aluminium operations, after announcing a company-wide review to reduce costs by more than $US5 billion.

The mining giant aims to reduce its operating and support costs by more than $US5 billion ($A4.81 billion) by the end of 2014 and will cut spending on exploration and evaluation projects by $US1 billion ($A961.95 million) over the remainder of 2012 and 2013.

Chief financial officer Guy Elliott said the miner, which was heavily focused on iron ore, would look at "every available opportunity" to reduce costs and improve productivity.

"We're going to have some difficult discussions with labour," Mr Elliott told an investors' briefing on Thursday.

Coal and aluminium would be the focus of cost cutting as the company considered shutting operations that "don't deliver cash flow".

"The escalation of costs that we've seen, well above the rate of inflation ... in particular in Australia, is going to have to stop," Mr Elliott told investors.

He said Rio's aluminium operations could record an impairment in the year ahead.

However, the company is yet to finish reviewing its aluminium and coal operations.

Mr Elliott said the company would recruit 900 fewer people over the next five years as further divestments occurred.

Chief executive Tom Albanese said the cost of production for coking coal and thermal coal had both risen steeply in recent years and both operations had suffered from declining labour productivity and higher contract costs.

"They're both in the same swamp," Mr Albanese said.

The overall cost-reduction program was being undertaken to roll back "unsustainable cost increases" of the past few years, he said.

He added that post Fukushima, thermal coal markets could be more robust in the medium term.

However, both coking coal and thermal coal needed to become more competitive.

The short-term economic outlook for Rio remained volatile, with major uncertainties about economic growth in the United States and Europe.

But the company said it was guardedly optimistic on China's prospects.

Recent data from China suggested early signs of an improvement in economic growth, and Rio expects this to continue in 2013, causing a slight rise in the growth rate to above eight per cent.

The company added that it had expanded capacity at its Pilbara iron ore operations from 230 million tonnes to 237 million tonnes through productivity improvements and holding down the costs of expansion.

Rio Tinto shares closed 48 cents higher at $57.18.