More cost cutting as Rio cuts China growth assumption

Mining giant Rio Tinto is set to brag about outperforming its peers at an investor seminar held jointly in New York and London on Tuesday afternoon, though it concedes that market conditions in the short-term are likely to remain volatile.

The group is speeding up its cost cutting programme after reducing its expectation of growth in the Chinese economy. The mining colossus now expects growth in Chinese gross domestic product to be just below 8%, down from its previous assumption of 8% growth. The cost cuts, meanwhile, will primarily be in operating, evaluation and sustaining capital costs across the business. The group's current cost reduction programme has already slashed service and support costs by $0.5bn a year.

Rio Tinto Chief Executive Tom Albanese is set to tell the investment analysts and assembled hacks in London and New York that "significant stimulus efforts have been announced in China, the US and Europe, but it's uncertain exactly when we will see the impact of these on our markets. Given this, and the considerable price fluctuations in recent times, we are somewhat more cautious on the outlook over the next few quarters.

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"Our business remains resilient in this environment and our operations are performing better than our peers, reflecting our consistent strategy of running long-term, cost-competitive operations. We aim to maintain our single A credit rating and are driving our cost reduction efforts harder and faster."

The seminar is focusing particularly on Rio's copper operations and its Technology & Innovation group.

Rio Tinto's copper production is expected to increase from 2013 as a result of improving grades and investments at Kennecott and Escondida and by the start of production from the Oyu Tolgoi mine in Mongolia. From 2011 to 2015, Rio Tinto expects to achieve a cumulative annual growth rate of 13% for copper.

The short-term outlook for copper remains volatile but Rio Tinto continues to believe that the market's long-term fundamentals remain robust given urbanisation in emerging markets. On the supply side, annual production across the industry continues to fall short of expectations, a trend Rio Tinto expects to continue.

The seminar will be shown live on Rio Tinto's web site (www.riotinto.com) from 14:30 British Summer Time.

JH