Rio Tinto's profit slumps 65 percent

[August 20, 2009]  MELBOURNE, Australia (AP) -- Mining giant Rio Tinto said sharp falls in metals and mineral prices were behind first-half profit dropping by nearly two thirds.

The world's third-largest miner Thursday reported a net profit of $2.5 billion for the six months ended June 30, down 65 percent from a year earlier, and was cautious about whether recent gains in commodity prices would be sustained.

"However, the expectation that development in emerging markets will generate underlying strength in metals and minerals demand over the long term remains broadly unchanged," Chairman Jan du Plessis said in a statement.

He said the Anglo-Australian company is financially stronger after using money raised from a recent share issue to reduce net debt by $14.8 billion.

"There is more work to do, but we are better positioned with renewed financial strength and a leaner cost base," he said.

Last week, rival miner BHP Billiton Ltd. revealed a 61.8 percent fall in profit for the year through June, also due to commodity price falls.

Rio Tinto CEO Tom Albanese said the company was on track to meet commitments made in December to reduce operating expenditure despite the tough market conditions.

But in light of the improving economic climate, the group was reviewing its expenditure plans for 2010.

"Despite difficult markets, our businesses are running smoothly," Albanese said.

Rio Tinto shares closed down slightly at 58.03 Australian dollars before the company's announcement.

Rio announced earlier this week that packaging company Amcor has offered to buy Rio remaining Alcan Packaging divisions for $2.025 billion, a major step toward reducing the miner's large debt load.

Rio incurred significant debt in its 2007 purchase of Canadian aluminum giant Alcan Inc. for $38 billion, a burden made worse by the credit crunch and global downturn.

Senior Rio executives expressed their concern for four employees arrested in China last month on commercial spying and bribery charges.

"I am naturally personally concerned about them, but I want to stress that we will respect the Chinese legal process," du Plessis told a teleconference to discuss the company's earnings.

Albanese said: "Our first priority is our duty of care to them and their families and we don't want to say anything, or do anything that could negatively affect them. We are pleased they have been treated well ... and their families have legal teams in place."

The four, including the head of Rio's iron ore operation in China, Australian citizen Stern Hu, were arrested July 5 amid tough negotiations with Chinese steelmakers about iron ore prices.

The case has contributed to strained diplomatic ties between Beijing and Canberra, where officials are worried that Hu may not get a fair trial.

[Associated Press]

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