Rio Tinto cautiously optimistic on China growth

MELBOURNE Wed Nov 28, 2012 4:58pm EST

MELBOURNE Nov 29 (Reuters) - Global miner Rio Tinto is cautiously optimistic about a pick-up in growth in China, its biggest customer, it said on Thursday, following a recent string of stronger-than-expected economic indicators.

"The short-term macroeconomic outlook remains volatile, with major uncertainties around future U.S. and European economic growth. However, Rio Tinto is guardedly optimistic on China's prospects," it said ahead of an investor briefing in Sydney.

Rio Tinto is the only global iron ore producer that has not slowed iron ore expansion plans in the wake of a slump in iron ore prices, forging ahead with $21 billion in mine, port and rail work to boost its Australian capacity to 353 million tonnes a year by the first half of 2015.

It said it was on track to reach 290 million tonnes a year by the fourth quarter of 2013, and the project in Western Australia's Pilbara region remained on budget.

Highlighting its advantage over other iron ore producers, Rio said its cost per tonne of iron ore would fall from $47 a tonne delivered to China, including royalties, shipping and sustaining capital costs, once its infrastructure expansions are completed.

However, like its peers, it is scrambling to slash costs to preserve profit margins as commodity prices have tumbled.

It said it is aiming to cut more than $5 billion of operating and support costs by the end of 2014, and would cut spending on exploration and evaluation projects by $1 billion over the rest of 2012 and 2013.

It also plans to cut spending on sustaining operations by more than $1 billion in 2013.

The world no.2 iron ore miner said in August it expected capital spending on all its projects to peak in 2012 at $16 billion, with its share of that at $13.6 billion.