Rio Tinto to cut 14,000 jobs

By Sonali Paul and James Regan

MELBOURNE/SYDNEY (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 by more than half and sell more assets as it battles a collapse in commodity prices.

Rio, which mines a range of metals and minerals from aluminum and copper to gold and diamonds, 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 17.2 percent to 1,474 pence by 1219 GMT, outperforming a 7.2 percent increase in the UK mining index. Its Australian shares closed up 12 percent as investors had anticipated its announcement, said UBS analyst Glyn Lawcock.

The group's shares had dropped 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."

SLASHES 2009 CAPEX

Rio said it would slash capital spending next year by more than half to $4 billion from the previously forecast $9 billion.

Some projects would be deferred and others canceled, with details provided at year-end results due in February.

A Rio spokesman in Guinea, however, said the company had already decided to postpone its massive Simandou iron ore project in the country, estimated to cost $6 billion.

"At the end of last week we contacted the government to inform them that we are going to defer our investments," said Jordan Feilders.

The group also canceled plans to boost its dividend by at least 20 percent this year and next.