Rio Tinto Freezes All Salaries Including CEO's for 2016

By Alex MacDonald

LONDON--Mining giant Rio Tinto PLC (RIO) has frozen the salaries of all its employees, including the chief executive, and is urging staff to cut back on all non-essential activities to preserve cash amid a protracted slump in commodity prices.

The London shares of the Anglo-Australian miner, the world's second-largest by market value, have fallen nearly 40% over the past year after the price of iron ore and copper dropped to multi-year lows in recent weeks.

The spot price for iron ore, a key steelmaking ingredient and Rio's main earnings driver, has fallen 70% to just under $40 a metric ton from $130 a ton a year earlier while the copper price has fallen by more than 20% during the same period to a new six-and-a-half-year low of $4,330 a ton on Thursday.

"As part of the focus on cash, from the CEO down, we are implementing a salary freeze for 2016," said David Outhwaite, a Rio Tinto spokesman in an emailed statement. "Of all the actions we are taking, this decision was one of the most difficult, as it doesn't reflect the hard work or effort put in by our employees. But it is necessary given the market context."

When asked if the company would also cut its dividend to preserve cash, Mr. Outhwaite declined to comment. Analysts expect Rio may face pressure to pare back its dividend after other top mining firms such as Brazil's Vale SA, Switzerland's Glencore PLC, and the U.K.'s Anglo American PLC cut their dividends last year. Fellow Anglo Australian peer BHP Billiton Ltd, the world's largest by market value, has already said it will review its dividend policy in February when its board meets.

Citigroup cut its target price on Rio Tinto's stock by 16% to 2,100 pence a share Thursday on expectations the company will generate lower earnings after it downgraded its iron ore price forecast to around $35 a ton over the next few years from $40 a ton previously.

Write to Alex MacDonald at [e-mail]

(END) Dow Jones Newswires

January 14, 2016 11:13 ET (16:13 GMT)

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