* Iron ore price falls 40 percent in a year
* Rio cuts jobs in London, Australia
* Moves departments to lower-costs locations
By Silvia Antonioli and Clara Ferreira-Marques
LONDON, Oct 4 A steep fall in iron ore prices
over the last three months has forced global miner Rio Tinto
to accelerate and deepen a cost-cutting programme
across its back office, sources close to the situation said this
This follows efforts of competing miners, including BHP
Billiton and Anglo American, to tame rising
costs at a time of sluggish economic growth and weaker metals
Australia's Rio Tinto - which gets some 80 percent of its
profits from iron ore and is the diversified miner most exposed
to fluctuations in the steelmaking ingredient - is cutting jobs
in London and Melbourne, a source with knowledge of the
situation told Reuters.
It is also moving various departments to lower-cost offices,
the source said. The exploration, purchasing and shipping
departments, for example, are being moved from Australia to
Singapore and the health and safety department, currently in
London, is being moved to India.
The miner had already announced its intention to shut down
its Sydney office.
"The company was taken by surprise by the iron ore price
fall," the source said.
"Rio was very bullish on iron ore until a few months ago but
those predictions have proven completely wrong so now it is
drastically trimming costs, cutting positions outright or
shipping departments or parts of them abroad," he said.
Iron ore lost 35 percent of its value in the
July-August period. It recovered some ground in the last 4 weeks
but its price remains 40 percent lower than a year ago.
Shares in Rio Tinto, which is the world's second-largest
iron ore producer after Brazil's Vale, have fallen by
about 10 percent since early July.
With iron ore prices at around $100 a tonne
cost-and-freight (cfr) to China currently, the miner can still
count on solid margins as it can produce and ship iron ore to
China for about $50 cfr, but the firm has to cut down spending
on support costs, including administrative and back office
roles, the source said.
"Like others in the industry, Rio Tinto is facing the
challenge of increasing costs. We are actively seeking ways to
tackle this," said a spokesman for Rio Tinto, declining to
comment on specific cuts and moves.
"This includes a programme of reductions in service and
support costs across the organisation, which have been rising
sharply in recent times."
Miners across the board have been cutting back as they
grapple with a combination of low metals prices, weak demand and
In Australia, for example, high-cost operations have found
themselves under pressure and miners such as BHP Billiton and
Xstrata are cutting jobs in coal mines.
Rio Tinto will also cut jobs at its Australian Coal & Allied
Industries unit as it struggles with a steep drop in coal prices
and a high Australian dollar.
Rio posted a 34 percent drop in first-half profit, joining
major rivals Anglo-American and Xstrata in reporting
earnings dented by weaker prices, mainly due to a slowdown in
top consumer China, and stubbornly high costs.