Rio Tinto Outlines New $5 Billion Productivity Push
Rio Tinto has committed to generating $5 billion of additional free cash flow over the next five years.
Rio Tinto reportedly has committed to generating $5 billion of additional free cash flow over the next five years from a productivity drive unveiled recently as part of its long-term strategy. In a presentation at an investor seminar in Sydney, Australia, Rio Tinto Chief Executive J-S Jacques underlined the strategy centered around a strong focus on safety, cash generation, a world-class portfolio, commitment to capital discipline and the delivery of shareholder returns.
Rio Tinto intends to raise productivity across its portfolio of assets by focusing on operational excellence to generate superior shareholder returns through the cycle. This is expected to generate a total $5 billion of further free cash flow by the end of 2021, in addition to the cash cost reduction target of $2 billion from 2016-2017.
“Our strategy plays to our strengths: world-class assets, a strong balance sheet along with commercial and operating excellence,” said Jacques. “A relentless focus on generating cash, together with capital discipline—prioritizing value over volume—means that investors can expect us to deliver superior shareholder returns whilst continuing to invest through the cycle. We have the right team and performance culture in place to deliver this strategy. We have placed our assets at the heart of the business to drive improved performance and ensure our resilience through the cycle. We are well on track to meet our target of $2 billion of cash cost savings by the end of next year. We are also taking advantage of any opportunity to generate value from mine through to market. Lifting the productivity on our $50 billion asset base creates a low risk and highly attractive return. It will deliver an additional $5 billion of free cash flow over the next five years. We are continuing to reshape our portfolio. Following our announcement yesterday that we will sell our Lochaber smelter in Scotland for $410 million, the total of agreed divestments in 2016 now stands at $1.3 billion.”
In addition to improving the performance of its asset base, Rio Tinto is also committing itself to investing in growing its business. In the near term, this reportedly will be delivered via three growth projects: Silvergrass, iron ore in Western Australia; Amrun, bauxite in Queensland; and Oyu Tolgoi, copper and gold in Mongolia. Longer term, exploration remains a priority for Rio Tinto, with a commitment to maintain the group’s successful exploration program.
For more information, visit www.riotinto.com.