Mining giant Rio Tinto’s new CEO, Sam Walsh, last week set out stringent cost control measures in an effort to return shareholder value.

“Under my leadership, Rio will have an unrelenting focus on pursuing greater value for shareholders. To do this, we need to run the business as owners and not managers, and my immediate priority is to build more focus, discipline and accountability throughout the organisation,” Walsh said.

He noted that the company would only invest capital into assets that, after prudent assessment, would offer attractive returns and were well above the company’s cost capital, while balancing the use of capital between shareholder returns and capital expenditure (capex).

Rio was also targeting cumulative cash cost savings of more than $5-billion by the end of 2014, and would reduce capex on approved and sustaining projects to around A$13-billion during 2013.

The miner would further lower capex on exploration and evaluation by $750- million in 2013, compared with the amount spent in 2012.

The mining giant reported a $14.4- billion write-down during the financial year, related to the Mozambique coal operations, as well as a reduction in the carrying value of Rio’s aluminium assets, which saw then chief Tom Albanese step down as the head of the company.

Chairperson Jan du Plessis said last week that, despite the write-down, the company had generated strong cash flows and underlying earnings of $9.3-billion during the full year.

“The quality of our assets, combined with our positive long-term outlook, gives us confidence in the sustainable cash- generating abilities of our business,” Du Plessis added.

Walsh added that, during 2012, Rio generated strong margins in copper, iron-ore and minerals, reflecting the company’s industry-leading position in each of the sectors.

“But our aluminium and energy busi- nesses faced a deterioration in market conditions, coupled with rising costs, which we are addressing through our cost saving and value enhancement programmes.”

For the 12 months to December, Rio reported a net loss of $2.9-billion, which was 151% lower than the net earnings of $5.8-billion reported in 2011. Underlying earnings for the period reached $9.3- billion, a 40% decline on the $15.5-billion reported in the previous financial year.

“Looking ahead, we see the positive momentum in the fourth quarter of last year being sustained into 2013, with Chinese gross domestic product growth returning to above 8% in 2013,” said Walsh.

“We expect market uncertainty and price volatility to persist as long as the structural issues in Europe and the US remain unresolved,” he added.

Walsh noted that, throughout 2013 and 2014, Rio would seek to enhance margins at its existing businesses by unlocking substantial productivity improve- ments, aggressively reducing costs and better managing its sustaining capital.

“We are targeting cumulative cash cost savings of more than $5-billion to be achieved over the next two years, equiva- lent to an annual run rate of $3-billion by 2014, assuming stable market and operating conditions, with significant additional cash savings in sustaining capital expenditure, and exploration and evaluation spend.

“We are optimising our future capital allocation by prioritising and investing in only the highest-returning projects. Our major capital projects in copper and iron-ore continue in line with expectations and are poised to deliver additional volumes this year,” Walsh said.

He noted that this pursuit of greater value for Rio’s shareholders was a serious commitment that would inform all the decisions and actions taken across the organisation.

“These are the right steps to take, and I believe they will help build a stronger, better company.”