Rio cuts capex by $US1bn

Rio Tinto expects to cut its capital expenditure from a previously forecast $US6 billion to around $US5 billion next year, but it’s unclear if the new figure includes the expected cost of its proposed Silvergrass iron ore mine.

The mining giant said today that its new capex estimate for 2016 would be in line with that of 2015.

Chief executive Sam Walsh said the company’s prudent capital allocation and disciplined approach to the balance sheet reinforced its resilience during an ongoing volatile time in the resources sector.

“With all of our investment decisions framed by the need to deliver value for shareholders, we have remained focused on investing in only the best quality projects,” he said.

“Our business is built around long-life, low-cost expandable assets that are complemented by best-in-class operational and commercial expertise.

“As we approach the start of 2016, we are well positioned to continue to provide returns for our shareholders and invest in our business.”

The company added that it was making progress on reducing costs and improving productivity at its Aluminium business.

By the end of 2015, the Aluminium product group will have delivered around $US300 million of cash cost improvements, $US45 million in capital expenditure cuts and around $US400 million in cuts to working capital compared with 2014.

"Further improvements will also be made in productivity in 2016," the company said.

Last week, Rio iron ore president Andrew Harding gave a strong indication that the company was planning to approve a $1 billion expansion of its Silvergrass mine in the Pilbara.

After an address at the WA Mining Club in Perth, Mr Harding told reporters the company would be signing off on a full-scale development at the mine next year.

Rio deferred making a decision on the Silvergrass mine until the third quarter of last year, at which point the decision was again postponed.

Rio shares closed 4.2 per cent lower to $42.40 each.