Rio Tinto is buying back $1.5 billion of its debt

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Rio Tinto is using its strong cash flow to buy back debt.

The big miner has launched cash tender offers targeting $1.5 billion of its 2017 and 2018 notes.

“Rio Tinto is using its strong liquidity position to reduce gross debt through the early repayment of some near term maturing debt,” the company told the ASX.

Falling commodity prices, mainly iron ore, are crushing Rio’s profitability. Its latest full-year results showed a net loss of $US866 million, compared to net earnings the previous year of around $US6.5 billion.

The company currently has net debt of $13.8 billion, up about 10% on a year ago, according to its full year results.

The program to cut debt is part of the miner’s response to falling commodity prices. It has also cut costs, frozen wages, increased ore output and pulled back on capital spending.

The company will start on a new round of measures to cut operating costs by a further $1 billion in 2016 followed by an additional goal of $1 billion in 2017.

Capital expenditure is being cut to $4 billion in 2016 and $5 billion in 2017.