Rio Tinto (RIO) - Get Report may be gorging on a more-than 60% increase in the price of iron ore but it is still tightening its belt.

The world's No. 2 mining company by market capitalization on Thursday said it expects to generate $5 billion in extra cash flow over the next five years by cutting operating costs, and that next year's free cash flow was likely to come in at about $10 billion based on third-quarter prices. The company posted free cash flow of $2 billion in the first six months of this year.

Rio Tinto shares traded Thursday at 3,098, marginally lower than their Wednesday close. The stock has gained 60% over the past six months, boosted by increases across many of its mine products, most notably iron ore and coking coal.

"Our focus on generating cash together with our relentless capital discipline, means you can
expect us to deliver superior shareholder returns," CEO Jean-Sebastien Jacques told analysts at a capital markets day in Sydney. Increasing the productivity of our $50 billion asset base
is the highest return available to us. It will deliver an additional $5 billion of free cash flow over the next five years."

The $5 billion of savings "looks like a large target," said Goldman, Sachs & Co. in a note on Thursday.

In addition to cutting operating costs Rio Tinto said it had spent less than expected on new projects this year. On Thursday it lowered its 2016 capital expenditure forecast to $3.5 billion from $4 billion.

The current year is likely to be the low mark for Rio Tinto in terms of capital expenditure, with forecasts for 2017 and 2018 unchanged at $5 billion and $5.5 billion respectively. Those figures still represent a massive fall from the group's peak in 2012, when capital expenditure was over $17 billion.

Jacques, who took over the top job earlier this year, has overseen a radical change in Rio Tinto's past strategy of maximizing output to protect market share. On Thursday he re-affirmed his commitment to "value over volume," and said the company would continue to sell assets that it considered sub-sized or non-core while investing in its most profitable operations.

"We will exit any assets or projects that do not fit the bill," he told analysts. Rio Tinto on Wednesday agreed to sell its U.K. alumina business for $410 million. Rio Tinto has agreed on more than $1.3 billion of divestments this year and a total of $5.3 billion since January 2013, when it fired its then-CEO Tom Albanese and launched an overhaul of its operations following a record $14 billion asset writedown.

Rio Tinto also reaffirmed its iron ore shipment forecast of 330 million to 340 million tons for 2017. Forecast dividends for 2016 were left at $1.10 per share, including 45 cents already paid in the first half. The final dividend for 2016 will be set in February