COPPERTON — Mining goliath Rio Tinto Group, parent company of Kennecott Utah Copper, said Wednesday that it plans to reduce its net debt by $10 billion by the end of 2009 and cut 14,000 jobs worldwide.
"We will have to identify some jobs for reductions. There will be layoffs," Kennecott spokeswoman Jana Kettering told the Deseret News. "We don't know exactly which roles will be eliminated."
Rio Tinto officials said in a statement that the cuts will impact 8,500 contractor positions and 5,500 of its own employees. Those cuts are expected to save the company about $1.6 billion. Rio Tinto employs more than 97,000 people worldwide, not including 15,000 contractors, and has about 2,400 workers in Utah.
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 about $262 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."
Kettering said Kennecott president Andrew Harding has been communicating with employees in recent weeks about the potential impact of the economic downturn.
"I'm sure people are concerned, but they shouldn't be surprised, based on the commodity prices," Kettering said. She noted that copper prices have gone from about $4 a pound this past summer to about $1.40 this month.
Rio Tinto officials are telling workers in Utah to "stay safe" as they work, because "people can get distracted by these types of announcements," Kettering said.
Nicolette Jorgensen and Fausto Valdez, who both work for Kennecott contractor Ready Industrial, are concerned about the layoffs but confident that they will have jobs next year.
Standing outside of the Ore House Saloon after work near the base of the Bingham Canyon Mine late Wednesday afternoon, Jorgensen and Valdez said Kennecott needs contractors like Ready Industrial to maintain equipment and the conveyors that move ore, in order to keep mining operations going.
Valdez said it would cost Kennecott time and money to replace the services it would lose if Ready Industrial was caught up in the fallout of Rio Tinto's layoffs.
"I don't really think that they'll do that," Valdez said. His bosses have been reassuring leading up to Rio Tinto's announcement this week. "I'm pretty confident about it."
Jorgensen went to work for Ready Industrial as a foot in the door toward a job with Kennecott. With this year's economic downturn, she has had to adjust her planning for the future and try to have something waiting if the worst happens next year.
"I've been out looking for other jobs," she said. "We just have to hope for the best. ... The economy will go back up."
Kettering said the possible sale of two Rio Tinto business units based in Wyoming and Colorado may result in some of the needed job cuts. "That's assuming they sell," she said.
Rio Tinto, with corporate offices in England and Australia, said the cuts announced Wednesday are in response to "the unprecedented rapidity and severity of the global economic downturn" and are an effort to preserve value for shareholders "by conserving cash flow and reducing levels of debt."
Rio Tinto is also looking to reduce its operating costs by $2.5 billion annually in 2010. The company's chief executive Tom Albanese said making "tough decisions" now will position Rio Tinto for an eventual economic recovery.
"Notwithstanding the current financial turmoil, we continue to enjoy a suite of key assets which operate in the lower half of the cost curve in their industries, and our suite of growth assets remains capable of reactivation as soon as market conditions justify," Albanese said in a statement. Albanese was paid $3.1 million in his first seven months as head of Rio Tinto, according to news reports last March.
Kettering said Rio Tinto officials have been talking to employees in Utah about how the company is trying to conserve cash by cutting costs internally and continuing a hiring freeze, as well as cutting down on travel between the company's many business units worldwide.
Kennecott's beginnings date back to 1906, when mining began in the Bingham Canyon area, which is now the site of the world's largest open-pit mine. The life expectancy for that mine has been set at 2018, but the company announced plans in May to expand operations there to mine until 2036.
The company also has spawned Kennecott Land, focusing its efforts on the Daybreak residential development on the southwest side of the Salt Lake Valley.
This past year, Rio Tinto's financial stability faltered, more recently with BHP Billiton's decision last month to abandon its bid to take over the company. That development sent Rio share prices downward 35 percent last month on the Australian Securities Exchange. BHP is considered the world's largest mining company, and Rio Tinto is the third-largest.
Locally, Rio Tinto in September inked a 10-year deal worth a reported $1.5 million annually for naming rights to the Real Salt Lake soccer stadium in Sandy. Kennecott Utah spokeswoman Alexis Cairo said Wednesday that the naming-rights agreement would not be affected by Rio Tinto's cutbacks and layoffs.
In August, Rio Tinto had posted record first-half profits due to a jump in demand for iron ore from steelmakers in Asia and by the $38 billion acquisition last year of the Canadian company Alcan. Kettering said Rio Tinto plans to continue paying down on that debt.
Last June, Rio Tinto announced plans to invest $270 million in building a new facility that will process the metal molybdenum, of which the company produces about 30 million pounds a year. Since then, molybdenum prices have plummeted, but the company has said it will continue with its facility plans.
In London, Rio shares on Wednesday closed up 256 pence, or 20.4 percent, to 15.14 pounds ($22.50). In Sydney, where trading ended before the announcement, its stock rose 12.14 percent to AU$37.40 ($24.76).
Contributing: Associated Press; New York Times; Bloomberg News; Michael Black, Deseret News.
E-mail: sspeckman@desnews.com