Rio Tinto CEO Simon Trott outlined a plan on Thursday to generate $5 billion to $10 billion through divestments and productivity growth, as he moves to simplify the structure of the world’s largest iron ore miner.
Investors had been waiting for the details since Rio Tinto announced in August it would streamline its business to three core units from four and focus on profitable assets. Assets up for sale include Rio’s titanium and borates businesses.
Rio Tinto joins global peers in efforts to become leaner and more focused by selling non-core assets, cutting jobs, and tightening capital to boost investor appeal amid shifting commodity cycles and pressure for higher returns.
MINER IDENTIFIED GLOBAL ASSETS THROUGH REVIEW
The Anglo-Australian miner identified some global assets it does not need to own following a thorough review, Trott told media on a telephone call on the company’s strategy day.
“We’ll proceed and test the market for (titanium and borates) assets, together with some of the other measures across our footprint: things like land, infrastructure, processing assets, and mining assets … so we’re reaching up to $10 billion,” he said.
Talking to shareholders in London on Thursday, Trott added the miner is working with its main shareholder, Aluminium Corporation of China Limited (Chinalco), to resolve governance constraints limiting its ability to buy back shares.
Rio Tinto said it is also exploring commercial partnership options for some of these assets and plans to cut unit costs by 4% from 2024 to 2030.
It announced $650 million in annualised productivity gains and cost savings, with $370 million already realised and the rest to be delivered in the first quarter.
The figure included headcount reductions, Trott added, but declined to specify the number of jobs to be cut.
The company’s shares opened up more than 2% in London following his remarks, before clawing back gains, with some analysts expecting more.
“Headline cost out of $650 million [is] a little disappointing,” said Glyn Lawcock, an analyst at Barrenjoey.
However, analysts at Citi were more optimistic, saying “Rio … has laid out an attractive vision for the company, with positive guidance commentary for 2025 & 2026, reiterating the solid volume growth outlook by 2030 and capex normalization.”
Earnings could be boosted by as much as half by the end of the decade, Rio added, thanks to capital discipline, rising prices for its commodities and 20% growth in copper production.
UPS FORECASTS FOR COPPER OUTPUT
The miner also raised its 2025 copper production forecast, citing stepped up operations at its Oyu Tolgoi project in Mongolia.
Rio said it now expects copper production this year to range between 860,000 metric tons and 875,000 tons on a consolidated basis, up from its previous forecast of 780,000 tons to 850,000 tons. In 2026, it expects copper production between 800,000 tons and 870,000.
Rio earns profits primarily from iron ore but it is shifting focus towards copper, aiming to produce 1 million tons of the metal annually by 2030.
Copper prices stand at records, and the commodity is expected to be in high demand as the world adopts greener forms of energy.
Rio said it remains on track to boost copper output at Oyu Tolgoi by more than 50% this year and by about 15% in 2026.
Source: Reuters