Mining giant Rio Tinto has put a freeze on salaries for all employees, as it hunts for savings in the face of a continuing slump in commodities prices.
Chief executive Sam Walsh this week told employees there would be no pay increases in 2016, in view of the tough year ahead.
“Late last year, we saw market prices continue to rapidly fall. What we see ahead is very sobering,” Mr Walsh wrote in a memo to all Rio Tinto employees on Tuesday.
“This situation is not temporary and our industry is moving into the new normal which means we must continue to be one step ahead.”
He said the decision to freeze pay, while disappointing, was necessary given the market context.
The decision follows the company’s announcement in December that it would slash capital expenditure in 2016 by a sixth, to $US5 billion ($A7.18 billion).
All investment decisions needed to deliver value to shareholders, and Rio’s prudent capital allocation and disciplined approach to the balance sheet had boosted its resilience during the ongoing volatility, Mr Walsh said at the time.
Rio Tinto has been cutting costs this financial year due to weaker commodities prices, particularly its key export of iron ore, which currently trades at a 10-year low of just under $US40 a tonne.
Despite the sharp decline, the world’s second largest iron ore miner has continued to push ahead with production, along with rivals BHP Billiton and Brazil’s Vale, in an effort to corner the global market.
The company reported a half year net profit of $US806 million, down 82 per cent. Rio Tinto’s ASX-listed shares have slumped 40 per cent from a 12-month high.
In addition to the pay freeze, Rio has also asked employees to limit their travel, and flagged further scrutiny over consultancy and contractor spend.
Mr Walsh said he had cancelled many trips from his own calendar and had asked the company’s executive council members to reduce travel commitments in 2016.
The company would also deploy tools for stricter, more disciplined expense management, he added.