Rio Tinto is set to slash 14000 jobs yet their dividend payout is going to remain solid. From

the outside this may look like it’s just a company looking after their shareholders before their employees but when you think about it…. Another smoke and mirrors event has occurred.

14000 jobs? think about that. In the mining industry people have been paid pretty well for the last few years so lets equate this to a 112 million dollar saving in wages for (more than likely) productive people for the next 12 months. However to get rid of these people they are going to have to pay 14000 (are you feeling this number) people to do NOTHING for a few months. Thus degrading the shareholders equity.

All of this is occurring because Rio Tinto has taken on to much debt. It is that simple.

In 2006 Rio was sitting pretty making a net profit of 9 billion dollars with a seemingly miniscule 2.5 billion in long term debt. Shareholder equity had been growing nicely increasing 10 billion in the last 10 years. Remember boys and girls the name of the game is building equity!

They thought the profit train (based on mining boom) would go on forever so they decided to grow at an unnatural rate. Exposing their shareholders to a now $43.8 billion dollar long term debt. Pitting that figure against their equity of 28 billion makes no sense to me whatsoever.

Before sacking 14000 people, the management of this company should sack themselves for one of the stupidest decisions I have seen in a while. Of course this management group will hide behind the old ‘we didn’t know the market was going to crumble’ but a basic conservative outlook would have protected shareholders from idiotic decisions.

Sorry RIO holders, you have been crushed by the idiots in charge. I suggest you out them.