Rio to Boost up Capital Expenditure

Submitted by Jim Thesiger on 2 November, 2009 - 06:38

Rio Tinto (RIO), the renowned global mining company is planning to double its capital expenditure for the next year. The company has recently announced its budget of up to $US3.5 billion which it is planning to spend to pursue the growth projects. Rio chief executive Tom Albanese stated that strategic decisions taken by the company during the financial crisis has put Rio into a stronger position to utilize the present market opportunities. The company is currently in a good position to enjoy a disciplined growth and will balance this with the call for additional pay down debt, Mr. Albanese added. The miner is currently expecting to commit a minimum of $5 billion to capital expenditure in the coming year following a concerted attempt to reduce its expenditure and repay the debts over the last 12 months. The previous guidance of the company ($2.5 billion) was scaled back because of the massive financial crisis.

The chief executive has recently confirmed the major objectives for Rio Tinto over the next year which includes the join venture that it is planning to form with BHP Billiton and taking initiatives to pull the aluminium business out of trouble. Negotiation regarding the pricing of iron ore and the recent arrest of its executives in China will also receive priority. However, Mr. Albanese did not come up with any extensive comment regarding the arrest issue but expressed his concerns for the wellbeing of the executives and their family members.

It is to be mentioned that Rio Tinto rejected a multibillion-dollar takeover bid of BHP two years back. The company found it hard to service the huge debt which was borrowed to finance the Alcan acquisition. Later on, it planned to forge partnership with Chinalco to ease some of the debts. However, later Rio changed its plan and offloaded assets, undertook a rights issue and went in partnership with its fellow Australian miner in the Pilbara iron ore project following a recovery in the global market.