Simandou payments scandal ‘very challenging’: Rio Tinto
November 24 2016 10:42 PM
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Rio Tinto CEO Jean-Sebastien Jacques poses for a photograph during a briefing for journalists in Sydney. Speaking at the company’s annual investment day seminar, Jacques committed the world’s No 2 miner to boosting free cash flow by $5bn over five years, and flagged that capital spending this year would be lower than previously suggested.

Reuters/Sydney

Rio Tinto chief executive Jean-Sébastien Jacques said yesterday that the fallout from its discovery of payments in Guinea has been “very challenging”, in his first public appearance since the scandal erupted.
Speaking at Rio’s annual investment day seminar, Jacques also committed the world’s No 2 miner to boosting free cash flow by $5bn over five years, and flagged that capital spending this year would be lower than previously suggested.
Jacques, who sacked two top executives last week over $10.5mn in payments to an adviser who helped Rio win rights to the giant Simandou iron ore project, said he could not say more as the matter “is now with the relevant authorities”.
“In the five months since I became CEO I have travelled across the group and everywhere I have met really impressive people, and that is why recent events related to Simandou have been very challenging,” he said.
“What you need to know is the following: I take integrity and our code of conduct very seriously.
For me it’s absolutely non-negotiable. We must do the right thing wherever we operate,” Jacques said in his only remarks on the issue, which also involves two of his predecessors.
Rio said earlier this month it had alerted US, British and Australian regulators about the payments.
Jacques said Rio would boost free cash flow by $5bn over the next five years by working the company’s businesses harder, such as improving the use of its haul trucks by 30%, reducing down time of its equipment and boosting outpu  at its processing plants.
“Lifting the productivity on our $50bn asset base creates a low risk and highly attractive return,” he said. “This additional $5bn of free cash is not dependent on price recovery.”
Rio, which reported a 47% slump in first half profit in August to a 12-year low following a plunge in raw material prices, this week announced more job cuts at its Australian iron ore business, its most profitable sector. Analysts said the latest pledge reflected the focus on cash.
“They’ve been so beat up over the last few years and they realise this is what they need to do.
It’s like a pre-2005 model: be productive, cut costs, run the business hard and pay down debt,” said Shaw and Partners analyst Peter O’Connor
Jacques also emphasised that Rio was targeting returns, not market share, and would not hesitate to cut iron ore production if that helped to boost free cash flow. “If it means reducing volume, we’ll do it,” he said.
He also flagged that capital spending this year would be lower than the company had suggested earlier, coming in at less than $3.5bn compared to its guidance of around $4bn.




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