Major shake up at Rio Tinto to reduce debt

10 December 2008

One of the world's biggest diversified global miners, Rio Tinto, will axe more than 14,000 jobs globally, slash $5 billion in spending and increase asset sales as part of an aggressive cost cutting campaign to reduce its debt by $10 billion from $42 billion by the end of 2009.

After the short-lived joy of BHP Billiton abandoning its hostile $66-billion bid for Rio, the London-based miner's management realised that its t $42-billion debt from the takeover of US-based aluminium producer Alcan, announced in July 2008, would require repayments of $8.9 billion in October 2009 and an additional $10 billion the following year.

Australian media reports said that Rio was talking to its bankers to refinance its first debt repayment of $8.9 billion, due less than a year away.

The global recession, which has led to a sharp decline in the demand for minerals, will requie Rio to cut 14,000 jobs of its 112,000 workforce globally as well axe 15,000 contract workers and sell a large number of assets and cut cost by $5 billion, the company said in a statement to the Australian stock exchange yesterday.

The 14,000 job cuts of permanent workers and the reduction of contract workers by 15,000 will bring an annual operating cost savings of $1.2 billion with severance costs of $400 million.

"Given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximise cash generation and pay down debt," chief executive, Tom Albanese was quoted as saying.