Global mining giant Rio Tinto said Thursday it plans to make US$5 billion in savings by 2014 to rein in "unsustainable costs" as it battles volatile market conditions.
The Anglo-Australian miner, which has been hit by falling commodity prices, said it would also slash spending on exploration and evaluation projects by $1 billion over the remainder of 2012 and 2013.
"We are taking further tough action to roll back the unsustainable cost increases of the past few years and are maintaining a relentless focus on improving productivity," Rio chief Tom Albanese said in a statement to the Australian stock exchange.
"We are investing in the highest returning opportunities, delivering major projects on time and are taking advantage of the inbuilt flexibility in our phased investment programmes," he added.
"We have the ability to respond to changing market conditions and I am confident we have the right strategy to maximise shareholder value in the long term."
In an investor presentation, the company said the short-term macroeconomic outlook remains "volatile", citing "major uncertainties" around future US and European economic growth.
However, Rio said it was "guardedly optimistic on China's prospects".
"A number of recent macro leading indicators have beaten market expectations, suggesting early signs of economic pickup," it said.
"Rio Tinto expects this to continue in 2013, leading to a slight rise in Chinese GDP growth to above eight percent next year."
Iron ore, used in steelmaking, is Rio's main export from Australia and China is its key customer. The miner said it expects Chinese steel demand growth to peak at around one billion tonnes towards 2030.
To meet this demand, Rio said expansion of capacity at its Pilbara operations to 290 million tonnes a year was on track for the fourth quarter of 2013.
"Rio Tinto is very well positioned despite the challenging global economic environment," Albanese said.
"Today we are highlighting the strong future earnings potential from iron ore volume increases and higher-priced new titanium dioxide contracts.
"And we are showcasing the excellence of our West Australian iron ore business, which is delivering productivity improvements and holding down the costs of expansion despite the current headwinds."