14,000 jobs to go as Rio Tinto reduces operations

By Rebecca Keenan  |   2008-12-11  |     NEWSPAPER EDITION

RIO Tinto Group is to cut 14,000 jobs and slash US$5 billion in spending because of falling demand for metals, scaling back operations less than a month after BHP Billiton dropped a hostile bid.

Rio Tinto plans to reduce net debt by US$10 billion by the end of 2009 from US$38.9 billion and will sell "significant assets," the London-based company said yesterday. The job cuts are about 13 percent of the 112,000 workforce, Bloomberg News reported.

BHP Billiton abandoned its US$66 billion bid for Rio, the world's third-largest mining company, on November 25, citing Rio's debt and slumping demand for commodities. Companies worldwide including Sony, which has said it is to cut 16,000 workers, are reducing payrolls and investment to conserve cash.

Rio rose 120 pence, or 9.5 percent, to 1,378 pence by 8:06am in London, paring this year's decline to 74 percent and valuing the company at 21.3 billion pounds (US$31.6 billion).

The yield on Rio's US$2.5 billion of 5.785 percent bonds maturing in 2013 fell for a second day, declining six basis points to 16.64 percent, according to BNP Paribas. The price of the bond rose 0.2, or US$2 per US$1,000 face value, to 66.38 by 5:42pm Sydney time.

"There will be impacts on projects across the board," Rio said. "Some projects will be canceled and others deferred until markets recover."

Chief Executive Officer Tom Albanese said Rio wouldn't sell shares and abandoned a plan to raise dividends. The job cuts will save US$1.2 billion a year, the company said.

Talks to either sell assets or bring in joint venture partners have already started, the company said.