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

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