Rio Tinto says Simandou payments scandal 'very challenging'

SYDNEY (Reuters) - Rio Tinto (RIO.AX) (RIO.L) Chief Executive Jean-Sébastien Jacques said on Thursday that issues raised by the disclosure of payments in Guinea in 2011 were "very challenging", in his first public appearance since the scandal erupted.

Jacques, who sacked two top executives last week over $10.5 million in payments to an adviser who helped Rio win rights to the giant Simandou iron ore project, said he could not say more as the matter "is now with the relevant authorities".

"In the five months since I became CEO I have travelled across the group and everywhere I have met really impressive people, and that is why recent events related to Simandou have been very challenging," he told analysts at a briefing in Sydney.

"What you need to know is the following: I take integrity and our code of conduct very seriously. For me it's absolutely non-negotiable. We must do the right thing wherever we operate," Jacques said in his only remarks on the issue, which also involves two of his predecessors.

At the briefing, he outlined plans for the world no.2 miner to boost free cash flow by $5 billion over the next five years by working the company's assets harder, such as improving the use of its haul trucks by 30 percent, reducing down time of its equipment and boosting output at its processing plants.

He also flagged that capital spending this year would be lower than the company had suggested earlier, coming in at less than $3.5 billion compared to its guidance of around $4 billion (3.22 billion pounds).

"Lifting the productivity on our $50 billion asset base creates a low risk and highly attractive return. It will deliver an additional $5 billion of free cash flow over the next five years," Jacques said.

(Reporting by James Regan; Writing by Sonali Paul; Editing by Richard Pullin)