Rio said the cuts were in response to the “unprecedented rapidity and severity of the global economic downturn”.The developments follow on from the grim economic outlook expressed in Rio’s third quarter report.“Since that time, demand conditions have worsened further, and as a result the group’s priorities have reoriented around conserving cashflow and reducing near term borrowings,” Rio said.Rio declared debt reduction a “key priority” and said it aimed to reduce its net debt by $US10 billion by the end of 2009.As part of this strategy, it will seek to refinance its Alcan facilities in the term market.The company’s debt, as at October 31, stood at $38.9 billion.Meanwhile, in a further effort to cut costs and raise cash, the company is in discussion with third parties over potential asset divestments and possible investment options.Rio said it would also defer exploration expenditure.Total capital expenditure is forecast to be cut by more than $5 billion, from over $9 billion to $4 billion. Detailing the reasons behind the drastic measures, Rio chief executive Tom Albanese said the company hoped to position itself for a future turnaround.“We will minimise our operating and capital costs to appropriately low levels until we see credible and meaningful sings of a recovery in our markets, but will retain our strategic growth options,” he said.“We will expand further the scope of assets we are targeting for divestment. “By taking these tough decisions now we will be well positioned when the recovery comes.”
