Rio Tinto, the world's second-biggest mining company, will cut capital spending to about US$8 billion in 2015, less than half its outlay last year, as mineral producers conserve cash in the wake of falling prices. "Our capex is reducing, and will come down further," Sam Walsh, CEO of London-based Rio, said yesterday. "From where I stand, we continue to see market fragility and volatility." Rio's cutback underlines efforts by the world's largest mining companies to rein in spending as a decade-long boom in metal prices wanes. On Monday, Vale, the biggest iron ore producer, slashed its investment budget for a third straight year to US$14.8 billion, the lowest since 2010. "It's quite a substantial drop and it does suggest that right now Sam Walsh is concentrated very, very hard on affordability," said Evan Lucas, a Melbourne-based markets strategist at IG. Rio fell 0.6 per cent to A$65.49 at the close in Sydney. BHP Billiton, the world's biggest mining company, fell 1.2 per cent. "Over the longer term, I remain optimistic about demand for our products," Walsh said. "China's urbanisation will continue and the development of other economies as they continue to grow at pace, such as India, Vietnam, Indonesia, the Philippines, the Middle East, the former Soviet Union, South America and Africa, will also contribute to ongoing demand." The cut in spending on new projects and expansions will help Rio strengthen its balance sheet and cut net debt that rose to about US$22 billion by the end of June, chief financial officer Chris Lynch said at an investor briefing in Sydney. Reducing debt would be a priority for next year, he said. "This will result in a very strong balance sheet which will allow the board to make decisions around returns to shareholders and other allocations of capital," Lynch said. Rio was targeting a net debt reduction to the "mid-teen billions", he said. Rio, the world's second-biggest iron ore exporter, said last week that an expansion of its operations in Australia's Pilbara would cost US$3 billion less than previously expected to meet its goal of increasing capacity by about 25 per cent to 360 million tonnes. Liberum Capital estimated spending on the iron ore expansion had dropped to about US$2 billion from US$5 billion. "You can see where the cuts are coming from, and that's really anything outside of iron ore - they have no interest in ramping up their aluminium or their coal spending," IG's Lucas said. Rio has deferred the A$1.4 billion (HK$9.8 billion) South of Embley bauxite mine in north Queensland because the company is focusing capital spending on its iron ore and copper business, Walsh said.