Highlights from the presentations:
• Rio Tinto’s strategy of maximising shareholder value by investing in and operating large, long-term, cost-competitive mines and assets is unchanged.
• The short-term macroeconomic outlook remains volatile. Economic growth in China is robust but moderating, and is slow and uneven in developed economies. Rio Tinto expects China’s stimulus packages to take effect progressively after the Chinese leadership change and has therefore lowered its estimates for Chinese GDP growth this year to just below eight per cent. There are some positive signs on the European debt crisis and US quantitative easing although risks remain in both economies.
• Iron ore prices have partially recovered after a period of rapid decline but Rio Tinto expects them to remain volatile in the near future. Rio Tinto analysis suggests that around 100 million tonnes of primarily Chinese iron ore production had become unprofitable, and sees evidence on the ground that a large proportion of this has already been curtailed.
• With a continuing volatile short-term environment, Rio Tinto plans further cost reductions, primarily in operating, evaluation and sustaining capital costs across the business. Its drive to reduce service and support costs has so far produced savings of $500 million a year. Total annual capital expenditure on projects already approved is expected to peak in 2012.
• The longer term picture remains positive, with increasing urbanisation in emerging markets driving strong demand growth across a range of commodities, and a slower supply response from the industry.
Rio Tinto chief executive Tom Albanese said “Significant stimulus efforts have been announced in China, the US and Europe, but it’s uncertain exactly when we will see the impact of these on our markets. Given this, and the considerable price fluctuations in recent times, we are somewhat more cautious on the outlook over the next few quarters.
“Our business remains resilient in this environment and our operations are performing better than our peers, reflecting our consistent strategy of running long-term, cost-competitive operations. We aim to maintain our single A credit rating and are driving our cost reduction efforts harder and faster.
“Rio Tinto has the right strategy to maximise shareholder value in the long term. We are positioned to reap the benefits of long-term demand growth while withstanding short-term volatility. We have the flexibility to phase our investment projects and a disciplined and rigorous approach to capital allocation that ensures we only invest in the highest returning opportunities in the most attractive sectors and divest assets that no longer fit with our strategy.”
About Rio Tinto
Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and New York Stock Exchange listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.
Rio Tinto’s business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, thermal and metallurgical coal, uranium, gold, industrial minerals (borax, titanium dioxide and salt) and iron ore. Activities span the world and are strongly represented in Australia and North America with significant businesses in Asia, Europe, Africa and South America.