UPDATE 1-Rio Tinto delays new iron ore mine, promises big returns
* New mine deferred amid "challenging" near-term outlook
* Expects to announce capital return plans in February
* Sees iron ore margins at 56 pct even at weaker prices (Adds CEO comments, iron ore margins)
MELBOURNE, Nov 28 (Reuters) - Global miner Rio Tinto has deferred plans to build a $1 billion iron ore mine in Australia and said that, despite volatile commodity prices, it would be able to sharply step up returns to shareholders.
The move to delay an investment decision on its proposed Silvergrass mine until the third quarter of 2015 at the earliest follows a 50 percent slide in iron ore prices this year as Rio and BHP Billiton have flooded the market with new supply.
"While the long-term outlook remains sound, the near term is undoubtedly more challenging," Rio Chief Executive Sam Walsh said.
Rio is focusing on cutting spending to preserve cash so it can meet shareholders' demands for higher returns following a spending binge on bad acquisitions and huge mine expansions over the last seven years.
"Looking out over the next five years, we expect to generate strong free cash flow and we remain committed to materially increase cash returns to shareholders in a sustainable way," Walsh said in a statement ahead of an investor briefing.
"I look forward to announcing this at our annual results in February next year." Continuación...