Rio Tinto withdraws from Saudi equity partnership

Rio Tinto Alcan (RTA) is withdrawing from an equity partnership arrangement that had been set up to develop a $10 billion integrated aluminium project, in Saudi Arabia.

RTA had a 49% stake in the project but says it will be continuing its involvement through a co-operation agreement with Saudi Arabian Mining (known as Ma’aden).

This will involve providing technological input plus general advice and support.

RTA chief executive, Dick Evans, explains that the recent global financial and economic crisis has changed the group’s outlook for project development.

The move follows last week’s news of 14,000 job losses across Rio Tinto’s global operations.

The cull amounts to 12.5% of the workforce and forms part of a cost reduction programme that aims to reduce capital expenditure by over 50% in 2009 and cut operating costs by $2.5 billion a year from 2010.

The company has debts of almost $40 billion and analysts suggest that it needs to take drastic action.

The level of debt stems from the group’s acquisition of Alcan last year, since when the miner has been hit by falling commodity prices.

The group is also in the process of reassessing its position after BHP Billiton announced its decision not to pursue a $66 billion takeover of Rio, last month.