Rio rallies after belt-tightening

Rio Tinto is up 1.4% after announcing plans to make its operations more efficient.

The mining giant has revealed plans to shut down operations at its Gove alumina refinery, which will lead to roughly 1100 job losses. The chief executive officer Sam Walsh stated it was ‘a sad day for everyone associated with Gove’. The decision was taken as the operation was no longer economically viable.

Yesterday the Anglo Australian firm stated it has found a way to save as much as $3 billion from its iron ore operations in Western Australia; additional capital has been allocated for expanding existing mines, which is more cost effective than opening new mines. Rio Tinto has also deferred starting work on two new sites until the end of 2014 and 2016; this could be a sign they want to see how commodity markets fare in the near future before committing to operations.

The costs associated with mining operations often lag behind the price of the underlying metal. While commodity markets were strong it made financial sense to pay high wages and buy additional machinery, but now companies are trimming costs.

Rio Tinto chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts