updated 12/10/2008 8:40:33 AM ET 2008-12-10T13:40:33

Rio Tinto Group, one of the world’s largest miners, will cut 14,000 jobs worldwide and reduce capital investment as part of new measures to reduce its debt amid waning demand for iron ore and other metals, the company said Wednesday.

The job cuts — accounting for 12.5 percent of the company’s 112,000-person work force — and reduction in operating expenditure are expected to save at least 2.5 billion Australian dollars ($1.6 billion) a year by 2010, the London-based company said in a statement.

The cuts will mostly be on the contractor side, where 8,500 positions will be eliminated.

Rio Tinto has offices in 40 countries, with most of its employees in Australia and North America, as well as significant operations in South America and southern Africa.

The company also said it will try to sell “significant assets” that were not previously listed for sale in order to reach its goal of trimming AU$10 billion ($6.6 billion) from its debt by the end of next year.

“Given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximize cash generation and pay down debt,” Chief Executive Tom Albanese said in the statement. “We have undertaken a thorough review of all our operations and are executing a range of actions.”

“By taking these tough decisions now we will be well positioned when the recovery comes,” Albanese said.

Rio Tinto’s AU$38.9 billion debt was a key factor in rival BHP Billiton withdrawing its hostile takeover bid last month in the midst of the global economic downturn. Much of that debt is from its $38.1 billion acquisition of Canadian company Alcan last year.

Other mining companies would likely take similar measures in response to reduced demand, said John Meyer, an analyst at Fairfax IS investment bank in London. The booming demand in recent years led to expansion and job growth for many mining companies that is no longer sustainable, he said.

“The scale of the cuts looks dramatic but we would expect to see this across the industry,” he said. “Companies have expanded in recent years in response to high metals prices, but that’s over now. With the recent severe falls in demand, and the recent (economic) climate, we can see mining companies pulling back markedly.”

Rio Tinto spokesman Ian Head said there were no details yet on where, when or how the staff cuts would come. The Rio Tinto statement anticipated severance costs of AU$400 million.

“We’re working our way through the implications of this,” Head said. “We don’t expect to know more until sometime in the first quarter of next year.”

The world’s second-largest aluminum producer stressed it remains committed to its strategy of finding, developing and operating large, long life, low cost mining assets.

The company currently expects its global iron ore production and shipments for fiscal 2009 to be around 200 million metric tons (220.46 million tons). Aluminum production is forecast at 200,000 tons (224, 000 tons) and copper production at 830,000 tons (929,600 tons).

Rio Tinto is counting on the further industrialization of countries such as China and India to support higher levels of demand for metals and minerals.

In London, Rio shares were up 145 pence, or 11.5 percent, to 14.03 pounds. In Sydney, where trading ended before the announcement, its stock rose 12.14 percent to AU$37.40.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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