Rio Tinto (LON:RIO) said it has appointed a new chairman as it announced it is targeting US$5bn of additional free cash flow over the next five years.
Simon Thompson, who joined Rio Tinto as a non-executive director in 2014, will replace Jan du Plessis who steps down as chairman on March 5.
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Thompson has been chairman of 3i Group PLC (LON:III) since 2015 and was chairman of Tullow Oil plc (LON:TLW) from 2012 to 2017. He also previously held a number of senior roles at Anglo American PLC (LON:AAL), including chief executive of the base metals division and as chairman of the exploration unit.
"The Rio Tinto board would like to thank Jan for his significant contribution as chairman of Rio Tinto. He led the board during considerable transformation of the company,” said senior independent director Ann Godbehere.
Thompson will resign as chairman of the Rio Tinto remuneration committee and will cease to be a member of the audit committee on taking up the new position.
Free cash flow targets
His appointment was announced alongside a separate statement about the mining group’s investor seminar, which revealed plans to drive extra free cash flow.
In the first half, the company returned 40% of cash generated to shareholders, hiking its dividend to a record US$1.10 per share from US$0.45 a year ago and an extra US$1bn in share buybacks.
The latest buyback was on top of a US$500mln programme announced in February and came after doubling free cash flow to US$5.78bn.
This company has announced US$6.3bn of cash returns this year, with an additional US$1.9bn share buyback to be completed by end of 2018.
In its Monday statement, Rio’s chief executive Jean-Sébastien Jacques said: "All the evidence shows that our value-over-volume strategy is working: delivering superior cash returns for our shareholders, including US$8.2bn announced in 2017. We returned to shareholders 40 cents in every dollar of cash generated by the business in the first half.”
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Rio Tinto is targeting US$5bn in extra free cash flow from its five-year productivity programme from 2017-2021. From 2021, it is targeting US$1.5bn of annual additional free cash flow.
The company is on track to deliver additional free cash flow of US$300mln from productivity improvements in 2017 and a cumulative US$900mln by the end of 2018.
“With our top-tier assets producing quality low-cost products in high demand, a strong growth pipeline and the best balance sheet in the industry, we have a strong platform for future growth,” said Jacques.
China slowdown
However, Rio warned that of possible slowdown in China over the next six months, reflecting a weaker demand for construction, infrastructure and automotive.
As part of its plans, Rio said it is looking into brownfield, high-return growth, replacement and productivity improvement opportunities. These include the Koodaideri project in the Pilbara, brownfield Aluminium options in Canada, the Resolution copper project in the US and the Jadar lithium project in Serbia.
The projects will build on recent investments in the Silvergrass iron ore mine in Western Australia, the Amrun bauxite mine in Queensland and the Oyu Tolgoi copper and gold mine in Mongolia.
Capital expenditure is expected to be less than US$4.5bn in 2017, US$5.5bn in 2018 and US$6bn in 2019 and 2020.
Net debt at the end of June stood at US$7.6bn.