With plummeting commodity market and share prices, mining behemoth Rio Tinto on Wednesday said it is trimming its global workforce by 14,000 employees as part of a slew of measures to reduce its debt of $10 billion by the end of 2009.
"Given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximise cash generation and pay down debt. We are executing a range of actions," Rio Tinto chief executive Tom Albanese said in a statement.
The global headcount reduction would comprise laying off 8,500 contract-basis jobs and 5,500 employee roles, saving operating cost of $1.2 billion and upfront severance costs of $400 million, it said.
The announcement comes within weeks of its rival mining giant BHP Billiton scrapping $66 billion takeover bid, which was followed by a sharp fall in Rio Tinto's share price. World's largest iron ore miner Vale had also announced cutting 1,300 jobs last week.
Rio Tinto would consolidate its offices worldwide including that in London and is mulling options to defer some of its planned expenditure on exploration, as cost reduction measures, the statement added.
The company said it would be reducing capital expenditure for 2009 by over 50 per cent to $4 billion and added that it is committed to reduce 'controllable' operating costs by at least $2.5 billion per annum in 2010.
The Group's net debt was down by $3.2 billion to $38.9 billion in five months ended October 31, 2008, the statement noted.
Moreover, the London-headquartered firm said dividend to shareholders for 2008 would be held back at previous year's level of US 136 cents with no 20 per cent uplift in the next two years.
Also, the company would aggressively undertake divestment of its assets to earn quick revenue.
"We will minimise our operating and capital costs to appropriately low levels until we see credible and meaningful signs of a recovery in our markets, but will retain our strategic growth options. We will expand further the scope of assets we are targeting for divestment," he said.
Banking on its low cost operations and measures it would undertake, the company is hopeful of beating the global recessionary trends.
"Notwithstanding the current financial turmoil, we continue to enjoy a suite of key assets which operate in the lower half of the cost curve in their industries, and our suite of growth assets remain capable of re-activation as soon as market conditions justify," Albanese added.