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Rio records 2012 loss of almost $3 billion

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MELBOURNE, Feb 14 AAP

February 14 2013, 6:02PM

Global miner Rio Tinto says it will concentrate on operating low-cost mines and selling non-performing assets after posting a full year net loss of almost $US3 billion for 2012.

Rio's bottom line was pulled back by $US14 billion ($A13.61 billion) in writedowns and its underlying earnings fell 40 per cent to $US9.3 billion ($A9.04 billion).

The company unveiled plans to slash costs by more than $US5 billion ($A4.86 billion) by the end of 2014.

That includes reducing capital expenditure on approved and sustaining projects to about $US13 billion ($A12.64 billion) in 2013 and lowering exploration and evaluation spending by $US750 million ($A728.97 million) (pre-tax) in 2013 compared with 2012.

Last month, Rio wrote down its aluminium assets and a coal project in Mozambique to the tune of $US14 billion ($A13.61 billion), leading to chief executive Tom Albanese's departure.

His replacement Sam Walsh on Thursday said the company's strategy of investing in and operating large, long-life, low-cost mines and businesses would maximise returns for shareholders in a volatile economic environment.

"We are reinforcing our capital allocation processes and will only invest in assets that, after prudent assessment, offer attractive returns that are well above our cost of capital and which offer a superior return when compared to returning cash to shareholders," he said in a statement.

"We are also targeting significant cash proceeds from divestments of non-core businesses in 2013."

Mr Walsh said Rio last year generated strong margins in copper, iron ore and minerals.

"But our aluminium and energy businesses faced a deterioration in market conditions coupled with rising costs, which we are addressing through our cost-saving and value-enhancement programs," he said.

"Looking ahead, we see the positive momentum in the fourth quarter of last year being sustained into 2013 with Chinese GDP growth returning to above eight per cent in 2013.

"We expect market uncertainty and price volatility to persist as long as the structural issues in Europe and the United States remain unresolved."

Mr Walsh said Rio would target cash cost savings of more than $5 billion to be achieved over the next two years.