Bloomberg reported that Rio Tinto Group will probably slash investment spending by half next year to reduce its debt.

The report citing Morgan Stanley as saying that Rio will cut spending to USD 4.5 billion in 2009 from the current guidance of USD 9 billion, and to USD 5.3 billion in 2010. The bank had previously forecast capital spending of USD 8.7 billion next year and USD 7.8 billion in 2010.

Mr Craig Campbell analysts at Morgan Stanley remark that “We think it is prudent for Rio Tinto to reduce its capital spending and thereby provide a cushion to cash flow if commodity prices deteriorate further.”

It also noted that Rio will spend USD 1.1 billion less on Australian iron ore projects next year than previously forecast and USD 900 million less in 2010. The Yarwun alumina expansion in Australia will be cut by USD 700 million next year and USD 800 million in 2010. Canadian and Brazilian iron ore expansions will be slashed, as will spending on commodities including aluminum, coal, diamonds and molybdenum, Campbell wrote.

Rio is reassessing expenditure to cut costs and conserve cash after demand for metals plunged and prices slid. It is also evaluating projects after BHP Billiton scrapped a hostile bid because of turmoil in global financial markets and Rio’s USD 42.1 billion of debt.

The Daily Mail had earlier reported that Rio may cut thousands of jobs and postpone billions of pounds of big projects including the Simandou iron ore mine in Guinea and other ore and aluminum projects in Canada and Africa.