Rio Tinto Reduces Net Debt

Rio Tinto (RIO), the third largest mining company in the world has planned to reduce its net debt by $10 billion over 2009. The company has also planned to reduce the controllable operating costs by $2.5 billion within 2010. These plans aim at preserving value by maintaining cashflow and cutting the level of debt.

Rio Tinto's management has planned to reduce its employees by 13%, to cut capital spending in half and look for selling its assets. The company’s net debt has been reduced by $3.2 billion within 30 June to 31 October 2008 to $38.9 billion. As such the case, the company has decided to reduce its net debt by further $10 billion within 2009.

The mining company has decided to carry out refinancing of their Alcan facilities in the term market, and will take advantage of credit market conditions as and when they improve. Beside this, the company has available committed finance of $4.2 billion under Alcan Facility C, which was unused at 31 October 2008 and an unused bilateral banking facilities of $2.3 billion.

The company maintains its belief that the industrialisation of developing economies will increase the demand level of metals and mineral worldwide in the coming years. The announcement of the company ensures that the Group is well placed to exploit this fundamental trend when the global economy retrieves. Rio Tinto will be able to resume its growth programmes with its superior suite of assets and a stronger balance sheet.

Reacting to the situation, Tom Albanese CEO of Rio Tinto has said “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. We have undertaken a thorough review of all our operations and are executing a range of actions.”