Rio Tinto to double capex spending next year to at least $5bn

The group said the decision was taken after seeing signs of economic recovery and a decrease in its debt levels

LONDON (Reuters) - 

Mining group Rio Tinto (RIO.L) (RIO.AX) has doubled its planned capital spending for next year to at least $5 billion after it cut debt and saw signs of economic recovery. Capital spending in 2010 was due to be cut to $2.5 billion, just enough to sustain current mines, but current plans were for $5-$6 billion, Rio said in a statement on Friday ahead of a briefing for investors later in the day.

"We will continue our programme of cost reduction and debt repayments, but our renewed strength enables us to focus on disciplined capital expenditure on premier growth options," Chief Executive Tom Albanese said.

Capex this year is expected to be around $5 billion.

Rio shares in London, which have outperformed the UK mining index .FTNMX1770 by nearly 30% this year, rose 2.1% to 2,844 pence by 0845 GMT. This compared to a 1.1% rise in the mining index.

"We believe that the increased capex guidance puts the company on track to deliver production growth in medium term which was earlier put on hold to preserve cash," Liberum Capital said in a note.

Albanese said the boost in planned capex was made possible after the firm strengthened its balance sheet by raising funds in a $15.2 billion rights issue and by cutting costs.

The group said it was on track to achieve operating cost savings of $2.5 billion next year.

Rio, the world's third-biggest mining group by market value, said it had cut its net debt by 42 percent so far this year to $22.3 billion by the end of September.

"Coupled with early signs of economic recovery, we are now well-placed to look ahead to 2010 and beyond," Albanese said.

The group, the world's second-biggest iron ore producer, also said it was pushing forward with long-term plans to expand operations in the Pilbara in Western Australia to 330 million tonnes per year, up 10 million tonnes from its previous plan.

This month, Rio increased its forecast output of iron ore this year to 210-215 million tonnes from 200 million tonnes. Rio struck a positive but cautious note for a global recovery in minerals markets on Oct. 14 when it released third-quarter production data. (Reporting by Eric Onstad; editing by Simon Jessop and Rupert Winchester)

© Thomson Reuters 2009 All rights reserved.

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