Rio Tinto has started to mothball mining projects as part of a planned $5 billion (£3.4 billion) reduction in capital expenditure this year.

Among the projects to be cut, delayed or curtailed will be a $1.5 billion extension to the Argyle diamond mine in Western Australia. About 220 jobs will go as work on a shaft at the mine is halted. Rio plans to cut 14,000 jobs and save a further $2.5 billion a year in operating costs by 2010.

The cuts come as Rio looks to reduce capital spending this year from $9 billion to $4 billion after a collapse in metal prices. The company needs to conserve cash generated from metal sales to repay its $40 billion debt pile.

Rio has deferred the $229 million expansion of the Northparkes copper mine in Queensland and a move to automate train operations in the Pilbara is likely to be delayed. The $371 million train project was to serve its rail network in Western Australia's iron ore region. Rio has shelved a planned $2.15 billion expansion of its Corumba iron ore project in Brazil.

Analysts are eager to hear the future of Rio’s $10 billion iron ore project at Simandou, Guinea. The project has run into difficulty because Guinea’s Government is refusing to acknowledge Rio’s full control.

Some investors have doubts over its viability and may welcome an excuse to encourage Rio to drop the project. However, this could prompt the Government to revoke Rio’s mining licence and seize the asset, one of the world’s largest.

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