Dec. 10 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, will eliminate 14,000 jobs, reduce capital spending by more than half and sell “significant assets” as demand for metals sinks in the global recession.

One month after repelling a hostile bid from BHP Billiton Ltd., Chief Executive Officer Tom Albanese said in a statement today Rio needs to reduce costs “to appropriately low levels until we see credible and meaningful signs of a recovery in our markets,” which are suffering an “unprecedented rate of deterioration.”

London-based Rio jumped as much as 18 percent on the London Stock Exchange, paring this year’s decline to 72 percent, after saying it would reduce its workforce by 13 percent and lower net debt by $10 billion by the end of 2009. The company will also cut spending on new projects to $4 billion from $9 billion, may seek partners to develop some assets, and maintain its dividend.

While saving the 135-year-old company from a takeover by Melbourne-based BHP, the world’s biggest mining company, Albanese gave up the chance to sell Rio for as much as $194 billion just as the six-year bull market in commodities peaked. Now, Rio has a market value of $31.6 billion and $38.9 billion of debt.

“The shares will go higher from here as the market appears happy with the commitment and the size of the capex reduction,” Michael Rawlinson, mining and energy chief at Liberum Capital Ltd. in London, said by phone. “The two things the market really didn’t want, the dividend to be cut and new equity to be raised, have been addressed.” Rawlinson joined the London-based bank in October after working at JPMorgan Cazenove Ltd. and listing companies including Xstrata Plc and Kazakhmys Plc.

Hostile Bid

Rio, the second-largest producer of iron ore and aluminum, advanced 216 pence, or 17 percent, to 1,474 pence ($21.86) by 3:24 p.m. in London. BHP rose 8.2 percent to 1,252 pence.

BHP, the world’s largest mining company, abandoned its hostile bid for Rio on Nov. 25, citing Rio’s debt, antitrust concerns and slumping commodity demand. Aluminum has dropped 37 percent this year on the London Metal Exchange and copper has slipped 52 percent while cash prices for iron ore imported into China the world’s biggest buyer, have dropped 63 percent since March on weaker steel demand.

Albanese, 51, told reporters today Rio won’t sell shares and abandoned a plan to raise dividends. The job cuts will save $1.2 billion a year with severance costs of $400 million. Rio plans to reduce operating costs by $2.5 billion a year in 2010.

“There will be impacts on projects across the board,” Rio said in a statement without giving details. “Some projects will be canceled and others deferred until markets recover.”

Iron Ore, Alumina

Albanese declined to give details in a separate telephone interview from London on where savings will be made. Decisions on which projects will be canceled or deferred will be announced at the same time as Rio’s full-year earnings on Feb. 12.

Rio may defer $32 billion of new projects and expansions next year, Credit Suisse Group AG said Dec. 2. The $6 billion Simandou iron-ore mine in Guinea, a $7 billion expansion of its iron-ore mines in the Pilbara region of Western Australia, and the $1.8 billion Yarwun alumina expansion may be among the delayed projects, Credit Suisse analyst Jeremy Gray wrote.

Talks to either sell assets or bring in joint venture partners have started, the company said. Rio and BHP jointly own Chile’s Escondida, the world’s largest copper mine, and Richards Bay Minerals, the largest titanium producer.

Coal, Minerals Selloffs

“BHP is a much better poised company and it may end up picking up some of the better assets from Rio,” Sean Corrigan, chief investment officer at Diapason Commodities Management SA, said today in a Bloomberg Television interview from Lausanne, Switzerland. “It was a narrow escape for BHP shareholders and may just be a silver lining for them.”

Aluminum Corp. of China Ltd., also known as Chinalco, owns 9 percent of Rio. Lu Youqing, a vice president at Chinalco, couldn’t immediately be reached for comment on his mobile phone.

Rio plans to reduce net debt by $10 billion. The job cuts account for about 13 percent of the 112,000-strong workforce, including 15,000 contract workers. The most “advanced” of the existing assets sales are the packaging unit, the U.S. coal business and the minerals division, Rio said in the statement.

“The key is getting debt down as quickly as possible,” said Brad Shallard, an equities trader at Bell Potter Securities Ltd. in Perth.

The yield on Rio’s $2.5 billion of 5.785 percent bonds maturing in 2013 fell for a second day, declining six basis points to 16.64 percent, according to prices from BNP Paribas SA. The price of the bond rose 0.2, or $2 per $1,000 face value, to 66.38 by 5:42 p.m. Sydney time.

Rio Profits

Rio’s profit next year may be 36 percent lower than expected because of declining commodity prices, ABN Amro Holding NV said Dec. 3. The company may have net income of $9.5 billion in the year ending Dec. 31, 2009, down from a previous forecast of $14.9 billion, ABN said.

Rio said in July, before commodity prices collapsed, that it wanted to double production at its Pilbara ore mines to 320 million tons a year by 2012.

“There’ll definitely be some big job cuts in Western Australia,” said Peter Kenyon, a professor specializing in labor economics at Perth’s Curtin University. “There’s been a major labor shortage in Western Australia so the one thing that’s a worry is these companies may overreact and throw the baby out with the bathwater.”

To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net; Brett Foley in London at bfoley8@bloomberg.net

Last Updated: December 10, 2008 10:34 EST