Rio Tinto doubles 2010 capital expenditure; net debt falls

Production and Markets

Rio Tinto, the world’s third-largest mining company, will double capital expenditure in 2010 after cutting net debt by 42% in the first nine months of this year.

Spending will rise to between US$5 billion and US$6 billion, up from previous guidance of US$2.5 billion, the company said in a statement ahead of an investor briefing in London. Net debt dropped to US$22.3 billion at Septeber 30 and the company is on schedule to reduce operating costs by US$2.5 billion next year, Rio Tinto said.

Rio Tinto cut 16,000 jobs, sold assets and curbed spending after the global recession curbed demand for metals. The company also grappled with borrowings that ballooned after its US$38.1 billion purchase of Canadian aluminum producer Alcan Inc in 2007. In June, London-based Rio Tinto spurned a US$19.5 billion investment from Aluminum Corp of China in favour of a US$21 billion share sale and the formation of an iron-ore venture with BHP Billiton.

The funds from the rights offer allowed Rio Tinto to continue with its growth projects, which include the expansion of the Yarwun alumina refinery, the Kestrel coking coal mine and the Clermont thermal coal mine, chief executive officer Tom Albanese said in August.

The company is studying increasing iron-ore production in Australia’s Pilbara region to 330Mt/y, up from its previous guidance of 320Mt, Rio Tinto said.

Earlier this month the group, the world’s second-largest exporter of iron ore, raised its 2009 forecast for output of the steelmaking raw material, saying production will increase by as much as 7.5% as demand recovers.

Oct 30 (Bloomberg)