MELBOURNE (Reuters) – Global miner Rio Tinto, saddled with nearly $40 billion in net debt, said it would cut 13 percent of its workforce, slash capital spending and boost asset sales as it battles a collapse in commodity markets.
Rio has been under pressure to detail plans to cut borrowings since its share price slumped after larger rival BHP Billiton scrapped a $66 billion takeover bid for the company last month.
"What they've done has more than allayed fears in the market that they were going to come and have an equity issue," said Tim Schroeders, portfolio manager at Pengana Capital in Melbourne.
"Drastic times call for drastic measures. They've addressed all parts of the equation. They've definitely gone into survival mode, which is appropriate given the market circumstances," Schroeders said.
Rio's London shares jumped more than 10 percent as trading started. Its Australian shares closed up 12 percent at A$37.40, as investors anticipated its announcement, said UBS analyst Glyn Lawcock.
The group's shares had slumped 54 percent in the past month, more than five times the drop in the broader market.
Rio said it would reduce its global headcount by 14,000, including nearly 6 percent of its own employees and more than half its contractors, and increase the range of assets it was looking to sell, but said it was too early to be specific.
"Given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximize cash generation and pay down debt," Rio Tinto Chief Executive Tom Albanese said.
"We will minimize 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."
Rio took on huge bank debt to fund last year's $38 billion acquisition of Alcan, and pledged to raise $15 billion, most of it this year, from selling non-core assets, including Alcan's packaging business and Rio's U.S. coal business.
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