RIO Rio Tinto Plc

   By Rebecca Thurlow 
 

Rio Tinto PLC (RIO) has doubled its payment terms in a move that could make suppliers wait up to 90 days to be paid, as the unprofitable mining giant seeks improve its cash flow.

"This initiative is designed to free up cash and reduce working capital so that we can preserve and maintain jobs and suppliers in [a] tough global environment for commodities," a spokesman for the company said Saturday.

The move follows the miner's announcement at its results presentation in February that it would be embarking on a further round of measures to free up cash and reduce working capital, after it swung to a loss of $866 million in 2015.

The spokesman said Rio Tinto is working with banks to use its strong credit rating to establish financing that will help support suppliers through the transition to longer payment terms. The previous payment term was 45 days.

"This program is being piloted with several suppliers in our aluminum business, and we intend to make it more broadly available from midyear 2016," the spokesman said.

"Our goal is to continue to be a reliable business partner for our customers and suppliers while continuing to run a strong business for our shareholders and stakeholders," the spokesman said.

The new policy applies to all suppliers with contracts of more than 3 million Australian dollars (US$2.3 million) each. Those with contracts of less than A$3 million will be paid within 60 days.

In February, Rio Tinto said it was cutting its dividend and conceded that it had misread the strength of China's commodities demand, signaling a new era of diminished returns for mining investors.

Rio Tinto has spent billions of dollars expanding its mines and output in recent years. But its business has been hit by a slowdown in growth in China--especially in manufacturing and construction industries--that has weighed on global demand for commodities just as producers ramped up supply.

Write to Rebecca Thurlow at rebecca.thurlow@wsj.com

(END) Dow Jones Newswires

April 09, 2016 05:33 ET (09:33 GMT)

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