Rio Tinto is cutting debt by almost $4 billion

Paula Bronstein / Getty Images

Rio Tinto is further cutting debt, launching a bond purchase plan for up to $US3 billion ($A3.9 billion).

The big miner has issued a redemption notice for $US1.5 billion ($A1.96 billion) of its 2017 and 2018 US dollar-denominated notes and started cash tender offers to buy up to $US1.5 billion ($A1.96 billion) billion of its 2019, 2020, 2021 and 2022 notes.

The latest move follows a successful $US4.5 billion ($A5.89 billion) cash tender earlier this year which cut debt to $US12.9 billion ($A16.89 billion) and brought gearing (net debt to total capital) to 23%.

Rio Tinto is cutting costs, reducing dividends and using cash to pay down debt to compete in a low commodity price world.

Here’s Rio’s debt level as reported before the latest bond purchase plan:

Source: Rio Tinto

In its latest half year results, Rio Tinto’s underlying earnings fell 47% to $US1.563 billion ($A2.05 billion) as the miner continues to be hit by a global fall in commodity prices.

The company has also been reducing its dividend payout. The company announced in August an interim dividend of 45 US cents a share, consistent with its promise to pay no less than 110 US cents for the full year. However, that level would still be 48% down on last year’s payout.

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