The West

Rivals  cuts helpful: Rio  chief
Rio chief Tom Albanese. Picture:Lee Griffith/ The West Australian

The wave of project cancellations and deferrals in the Australian mining sector has led to some softening of cost inflation, according to Rio Tinto chief executive Tom Albanese.

Speaking ahead of investor presentations in London, Mr Albanese said the company was still committed to its own expansion plans in the State's north, saying recent moves by its rivals to put off capital spending had eased some local cost pressures, and improved Rio's "strategic positioning" against its major competitors.

"We are seeing some easing of the cost pressures - I think the best example at this point would be in the area of contracting costs. And I think for our purposes it is incumbent on us to make full use of these tailwinds as businesses in Australia - and particularly in Australian coal - become less and less competitive," Mr Albanese said.

While the situation had moderated a little, the Rio Tinto boss said Australia still needed to recapture productivity gains in the workplace if it was to regain its international competitiveness.

"What we've seen is almost a boiling frog syndrome where over the past couple of years we've seen the industry accepting higher levels of costs and less and less economic returns, on the basis of higher prices.

"And with the drop off in prices in almost all of our commodities, that frog is about to jump out of the pot and we've got to look at everything we can do to recapture some of the productivity we've lost over the last couple of years," he said.

While Rio remains committed to its current global expansion plans, with $US16 billion ($15.66 billion) in capital expenditure expected this year and a further $US14 billion next year, Mr Albanese said it was unlikely that any new major project approvals would be given in the near term.

Rio's Pilbara plans remain on track, however, with the company intended to take full advantage of moves by BHP Billiton and Fortescue Metals Group to wind back their capital spending plans.

"We're still continuing with our expansion efforts - we're looking forward to the 283 (million tonne a year expansion) being up and running next year as projected, and all of the planning and engineering for expansion to the Cape Lambert port and the rail for 353 as we've approved it continues on course," he said. But Mr Albanese warned of further job cuts at Rio as the company continued to try to shave costs across its operations.

With payment of the first quarterly Minerals Resource Rent Tax instalment by coal and iron ore companies due on October 21, Mr Albanese would not be drawn on how much Rio expects to hand over to Canberra, saying only the mining powerhouse would meet its legal obligations.

The West Australian

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