Rio Tinto Upgrades 2010 Capex Forecast To At Least US$5 Billion

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31 Oct 2009

Rio Tinto Ltd. on Friday more than doubled its capital expenditure forecast for 2010 to at least US$5 billion in a clear sign that the mining giant anticipates a further improvement in demand for its products. The Anglo-Australian diversified miner said in a filing ahead of an investor briefing Monday that it plans to spend at least US$5 billion in 2010, with the potential to rise to US$6 billion, up from a previous estimate of around US$2.5 billion.
Chief Executive Tom Albanese said the company will continue its program of cost reduction and debt repayments.
But he said its "renewed strength" will allow it to focus on "disciplined capital expenditure on premier growth options" to position the company for an expected recovery in demand growth over the longer term.
Rio Tinto also reiterated its recently upgraded 2009 capital expenditure target of about US$5 billion and said its net debt on Sept. 30 was US$22.3 billion, down 42% since Dec. 31, 2008.
The move to increase spending in 2010 is another sign that Rio Tinto is recovering from its earlier woes and follows comments by Albanese in August that the company expects to experience more stable and stronger trading conditions in the second half of 2009.
Rio Tinto witnessed "very strong demand from all markets" in the latest quarter, Sam Walsh, Rio's CEO for iron ore, said in an interview Oct. 15.
Rio Tinto was forced in July to raise A$15.2 billion from a share issue to lighten a heavy debt burden generated by its 2007 purchase of Alcan at the peak of the commodities boom.
It has also agreed to form an iron ore joint venture with rival BHP Billiton Ltd., although the proposed deal still needs the blessing of antitrust regulators.
Rio Tinto said Friday that it has raised a production target for its iron ore facilities in the Pilbara region of Western Australia state to 330 million metric tons per annum, up from the previous target of 320 mtpa by the end of 2012.
It didn't specify whether it is aiming to meet the new target by the end of 2012.
Albanese said the company has emerged from its challenges as a stronger business. "Coupled with early signs of economic recovery, we are now well-placed to look ahead to 2010 and beyond," he said.
Rio Tinto did not specify where it intends to spend its money, apart from saying that the investor briefing Monday will reaffirm its strategy of investing in large, long-term, cost-competitive mines.

Source: Dow Jones