Rio Tinto plans to cut costs by $7 billion over two years

On November 29, Rio Tinto announced that it will cut costs by US$7 billion by the end of 2014 and increase production of iron ore, copper and aluminum. "Rioto will take tougher actions to curb cost growth and continue to focus on increasing production," said Rio Tinto CEO Tom Albanese.

It is reported that iron ore business has always been a major part of Rio Tinto. In the past, due to the huge demand in the Chinese market, Rio Tinto's iron ore performance soared. Take last year as an example. In the entire sales revenue of Rio Tinto, iron ore accounts for approximately 44%.

However, Rio Tinto’s net profit dropped by 22% in the first half of this year due to the decline in prices of iron ore, copper and aluminum. "Even if they fall, they still have profits, and they have sales. They are only earning less than before," said Zhang Lin, an analyst at Lange Steel Network. Compared with the imported ore whose tonne price is around US$110, the cost of overseas mining is generally around US$40, and the tax burden is also much lower than that of domestic mines. This allows the iron ore business of the miners to still have a promising future.

Rio Pedro executive David Peever once told the media that Rio Tinto will promote the expansion of iron ore production in Western Australia through more efficient operations than other miners, “because the price of iron ore has fallen, and other miners in Western Australia have The project is not as fast as Rio Tinto.” According to the plan, Rio Tinto plans to increase its annual iron ore production capacity from 230 million tons to 283 million tons by the end of 2013 and to 353 million tons by 2015.

Albanese also said on the same day that although the short-term macroeconomic outlook remains turbulent and the economic growth in the United States and Europe is uncertain in the future, the long-term industry fundamentals remain attractive. In order to reduce the impact of the industry, Rio Tinto is also promoting a diversified development strategy. In addition to iron ore, the expansion plan also includes resources such as copper and aluminum.