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Rio cuts more jobs

In the past month, Rio Tinto (ASX: RIO) has made many decisions aimed at curbing growth and saving money in a pre-emptive effort to adjust for lowering commodity prices.

The latest job cuts come as CEO Sam Walsh sets about restraining costs from high growth projects and begins a period of consolidation. Up to 50 managers will lose their jobs with the possibility of some of those being moved from the iron ore business into another department, although a number of them will be made redundant.

Rio’s goal is to save more than $5 billion by the end of 2014 through sales of non-core assets and restructures, which should enable the company to give more back to shareholders as it heads through a period of uncertainty. However, despite iron ore hitting an eight-month low in May, it is anticipated that the company will still maintain its status as the biggest exporter of iron ore. It expects to be producing 290 million tonnes on an annual basis in the July to September period and this figure may go even higher later in the year.

Iron ore remains Rio’s most profitable business with over 47% of revenue coming from the steel making ingredient. Despite it possibly expanding its domestic iron ore capacity to 360 million tonnes per year, Rio is also backing the $21 billion Simandou project in Guinea. Although some believe the mine to be operational in 2015, the company is beginning to play down the possibility of that happening – no doubt a move that will allow the company get a more accurate reading on long term prices.

Foolish takeaway

Although our biggest miners and resource stocks like BHP (ASX: BHP) and Fortescue (ASX: FMG) seem more cashed up and cost efficient than ever, it may still be too early to jump on board. The price of many of their products, not only iron ore, has fallen sharply over the past few months and some are expected to go lower, meaning patience might allow investors to get a better deal.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.  

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