Rio Tinto announces billions in cuts

Mining giant Rio Tinto said it was targeting five billion dollars of cost savings by the end of 2014 as it voiced 'major uncertainties' about the future growth of the US and Europe.

The company said planned spending on exploration and evaluation projects would be reduced by $1bn over the remainder of 2012 and 2013.

Capital expenditure on approved and sustaining projects will taper off from current levels in 2013, while sustaining capital expenditure will drop by more than $1bn next year.

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The news was welcomed by investors, who pushed shares up 4.5% by 13:30.

"We are taking further tough action to roll back the unsustainable cost increases of the past few years and are maintaining a relentless focus on improving productivity," said Chief Executive Tom Albanese.

"The short-term macroeconomic outlook remains volatile, with major uncertainties around future US and European economic growth," he said.

However, the firm added it was " guardedly optimistic" on China's prospects, forecasting a light rise in Chinese GDP growth to above eight per cent next year.

It is eyeing strong future earnings potential from iron ore volume increases and higher-priced new titanium dioxide contracts.