Rio Tinto Committed To Higher Investor Returns, But Defers New Mine Decision

(RTTNews) - Mining giant Rio Tinto plc (RTPPF.PK, RIO.L, RIO, RTNTF.PK) said Friday that it is on track to deliver sustainable cash returns to shareholders in 2015, noting that its asset portfolio is positioned to generate strong free cash flow. However, the company deferred its investment decision on a proposed billion-dollar greenfield mine amid a slide in iron ore prices.

At an investor seminar in Sydney, Rio Tinto reiterated its commitment to capital discipline and shareholder value, saying it will focus only on the projects with the highest returns to drive shareholder value.

However, Rio Tinto added that it has deferred the investment decision on its proposed billion-dollar greenfield mine Silvergrass until at least the third quarter of 2015, at the earliest.

The company added that its originally forecast production for the delivery of 330 million tonnes of iron ore in 2015 and 350 million tonnes by 2017 remains unchanged, with the extra production coming from brownfield mines, debottlenecking and productivity across the Pilbara mine network.

Rio Tinto noted that the Pilbara expansion to 360 million tonnes a year will deliver an internal rate of return of 40 percent with a five-year payback period.

Sam Walsh, Chief Executive of Rio Tinto said, "Looking out over the next five years, we expect to generate strong free cash flow and we remain committed to materially increase cash returns to shareholders in a sustainable way. I look forward to announcing this at our annual results in February next year."

Rio Tinto said that while its capital expenditure was below the $8.5 billion forecast for 2014 and down 34 per cent year-over- year, it expects copper equivalent growth of 5.2 per cent a year to 2019, as it plans to invest in only those projects with the best returns.

Further, Rio Tinto said that it will reduce its operating and exploration costs by $5.4 billion by the end of 2015, compared with the 2012 base. The company also added that it has completed divestments of $3.5 billion since 2013.

The company noted that while the long-term outlook remained sound, the near term was undoubtedly more challenging.

On Monday, Rio Tinto's rival BHP Billiton Ltd. (BHP, BHP.AX, BBL, BLT.L) announced plans to focus on operating and capital productivity by raising annualized productivity gains target and cutting 2015 planned investment, without impacting production growth outlook.

BHP Billiton now targets $4 billion of annualized productivity gains in its core portfolio by the end of the 2017 financial year, up $500 million from the prior guidance of $3.5 billion.

BHP Billiton said the increased productivity gains target allowed it to trim planned capital and exploration investment for the 2015 financial year to $14.2 billion from the previously planned $14.8 billion. It also announced lower planned investment of $13.0 billion for the 2016 financial year. The company noted the cut in planned investment is not expected to impact production growth.

RIO closed Thursday's trading at $47.43, up $0.40 or 0.85 percent on a volume of 1.92 million shares.