Rio Tinto hit by falling prices

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Anglo-Australian mining giant Rio Tinto has reported its profits have been hit by falling metals and minerals prices in the global economic downturn.

Its profit for the first half of 2009 fell to $2.66bn (£1.6bn), down 63.7%.

Rio Tinto said a share issue earlier in the year had helped it reduce its debt of $39.1bn by $14.8bn.

Commenting on last week's arrest of Rio workers in China, boss Tom Albanese said he was pleased the charges they faced were less severe than expected.

The four workers were arrested on suspicion of stealing trade secrets and taking bribes.

It had earlier been suggested that they would be charged with stealing Chinese state secrets, a much more serious offence.

Job cuts

Rio had already announced that it would not be paying a half year dividend, but that it would pay a full year dividend if its results were good enough.

We remain cautious about the recent rally in prices Jan du Plessis, chairman, Rio Tinto

As part of its cost-cutting programme, the company announced it had cut 16,000 in the first half of the year, which was ahead of its target of 14,000.

Rio Tinto has also been selling parts of its business, especially units of the US aluminium company Alcan, which it bought in 2007.

It made $3.7bn of divestments in the first half of the year and has since announced an agreement to sell the Alcan Packaging business for $2.025bn.

Chief executive Mr Albanese said: "Despite difficult markets, our businesses are running smoothly.

He added that the company was on track to meet the cost-cutting commitments it had made in December.

Arrests

One of the big factors in Rio's profitability is the ongoing talks with Chinese steel mills about how much they are prepared to pay for iron ore.

It has offered a 33% price cut, but has said it is not prepared to sell at the slightly lower price set by Australia's Fortescue Metals Group.

But Rio's chairman Jan du Plessis said the firm remained "cautious about the recent rally in prices".

There is a degree of tension in the negotiations, because four of its staff have been arrested in Shanghai on suspicion of offering bribes.

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