Rio cuts (but what?)

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But what exactly? The AFR and BS are reporting it’s all about productivity:

Rio said it had boosted the size of the expansion plans to 360 million tonnes from 353 million tonnes previously through de-bottlenecking and productivity improvements with minimal spend.

It has a current production capacity of 237 million tonnes and expects to reach 360 million tonnes by 2015.

Rio said it was targeting a cumulative $US5 billion in cost reductions throughout the business by the end of 2014 from 2012 levels. It will reduce spending on sustaining capital by $US1 billion next year.

Rio also revealed it cost the miner $US24.50 per tonne to produce iron ore in the first half, or $US47 a tonneelivered to China including royalties and other costs.

And prospecting:

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The group will also cut spending on exploration and evaluation projects by $US1 billion ($A961.95 million) over the remainder of 2012 and 2013.

But there is also this:

Capital expenditure on approved projects will taper off from their current levels in 2013.

And this:

Rio Tinto’s major Pilbara iron ore expansion plan remains on budget despite the high Australian dollar and other cost pressures after the miner took measures, including a reconfiguration of its mine plans.

Any input from readers is welcome. It’s the pullback on expansion plans you’re having when you’re not pulling back plans…

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.