Rio Tinto said Wednesday that it would cut 14,000 jobs and sharply reduce spending as it attempts to reduce its net debt by $10 billion in 2009.
In a statement, the mining giant said that 8,500 job cuts are contract positions and 5,500 employee role cuts. The company also plans to reduce capital expenditures for 2009 from over $9 billion to $4 billion, while retaining future growth options and will further reduce such expenditures to “sustaining levels in 2010, absent an improvement in expected commodity market conditions.” The company also plans to reduce operating costs by at least $2.5 billion per year in 2010.
The London-based company cited the “unprecedented rapidity and severity of the global economic downturn.” The statement did not specifically mention its diamond operation, which is part of a vast mining operations that include aluminum, copper, energy (coal and uranium), gold, industrial minerals (borax, titanium dioxide, salt, talc), and iron ore.
The announcement came just weeks after BHP Billiton walked away from a long battle to acquire Rio Tinto.
Rio Tinto is struggling to reduce debt of nearly $40 billion, most of which stems from its purchase last year of Alcan. The job cuts will result in annual operating cost saving of $1.2 billion, the company said. Upfront severance costs of $400 million. Severance payments will cost $400 million.
“Given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximize cash generation and pay down debt,” Tom Albanese, Rio Tinto chief executive of, said in the statement. “We have undertaken a thorough review of all our operations and are executing a range of actions.”
He added, “We will minimize our operating and capital costs to appropriately low levels until we see credible and meaningful signs of a recovery in our markets, but will retain our strategic growth options.”
The company is also holding its dividend steady and said it would expand the list of assets it might sell in order to raise cash.