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A miner holds a lump of iron ore at a mine located in the Pilbara region of Western Australia December 2, 2013.DAVID GRAY/Reuters

Rio Tinto, the mining giant that owns Montreal's Alcan, provided more evidence that the era of massive spending on huge projects and acquisitions is over by pledging to shave billions of dollars off its capital spending budget.

The new era will see the Anglo-Australian miner focus on shareholder returns in an attempt to repair some of the damage triggered by years of overspending during the boom years, in the mistaken belief that strong global growth would propel commodity prices ever higher.

Rio CEO Sam Walsh on Tuesday said the company, the world's second largest miner, after BHP Billiton, would cut capital spending by at least 20 per cent in each of the next two years. That means spending would fall to $11-billion (U.S.) in 2014 from $14-billion this year, and to $8-billion in 2015.

Speaking at investor conference in Sydney, Mr. Walsh said "We lost our way...We are taking decisive action. Don't get me wrong, we have more to do."

In a statement, Mr. Walsh said "market fragility and volatility" is one of the reasons behind the reduced spending.

Mr. Walsh is an Australian who ran Rio's iron ore division, the company's biggest profit generator, until January, when he replaced Tom Albanese as CEO in January. Mr. Albanese oversaw a spending spree that included the $38-billion purchase of Alcan, one of the world's biggest aluminum makers, in 2007, right at the peak of the commodities and market. Alcan's value was written down by $11-billion in January, though that was just one of several blows taken by Rio's global aluminum portfolio, where total write downs have reached $28-billion.

Rio's aluminum and coal operations will take the biggest spending cuts as the company focuses on iron ore and copper.

Rio is shutting its money-losing Gove alumina refinery in Australia's Northern Territory. The move came shortly after Rio called off plans to spin off its Pacific Aluminum business because attempts to find a buyer came up short. The new plan calls for PacAl, as it is known, to be integrated back into the Rio Tinto Alcan aluminum division.

The attempted spin off of PacAl triggered speculation that Alcan would be the next to go. But it appears that Rio will put its aluminum businesses through a severe cost-reduction exercise before deciding their fate. The company plans to reduce the aluminum division's costs by $1-billion by the end of next year.

"With PacAl now off the market, Rio is focusing on cost reduction and improving liquidity to ensure that if the market does improve, any future spinoff will able to stand alone," Citigroup analyst Clarke Wilkins was quoted as saying in the Sydney Morning Herald.

Mr. Walsh is emerging as Rio's clean-up man. He has completed $3.3-billion in asset sales this year and intends to take $5-billion out of total annual costs by 2014. About 3,800 staff jobs have disappeared this year and another 3,000 jobs are being eliminated through the asset sales.

At the same time, the iron ore division, which accounted for 91 per cent of company income last year, is being expanded as Chinese demand remains robust. Rio's iron ore boss, Andrew Harding, said Tuesday that Chinese demand will increase by 7.5 per cent this year to 700-million tonnes.

Mr. Walsh said he remains bullish on iron ore demand. "China's urbanization 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," he said in a statement.

Rio is the world's second-biggest exporter of iron ore. Last week, it said that the expansion of its Pilbara iron ore operations in Australia will cost $3-billion less than previously forecast.

Rio shares fell just under 1 per cent in London trading Tuesday, for a one-year return of just under 3 per cent, greatly underperforming the FTSE-100 index. The company is valued at about £62-billion.