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UPDATE 2-Rio Tinto turns to its own board for new chairman

* Rio Tinto names new chairman

* Selects from within its board

* Remuneration head Simon Thompson will move to chair (Wraps in new chairman, adds outside comment, details)

SYDNEY, Dec 4 (Reuters) - Rio Tinto Ltd ended months of speculation on Monday, naming Simon Thompson as its next chairman to succeed Jan du Plessis, who will step down after serving almost nine years as chair of the Anglo-Australian mining house.

Thompson, a former mining executive who is chairman of Rio's remuneration committee, will become the company's chairman on March 5, 2018, Rio Tinto said.

"The board is delighted to have appointed Simon to chair Rio Tinto. He brings to the role a deep understanding of the mining industry, as well as a strong track record as a non-executive," said senior independent director Ann Godbehere.

Former Xstrata chief Mick Davis, an astute dealmaker, had been tipped at one point as a potential candidate to take over from du Plessis who is moving to chair British telecom BT Group .

"Thompson is well-versed in the Rio Tinto culture, which was very different to that of Xstrata," said a fund manager on the side of a Rio Tinto investment seminar in Sydney, who asked not to be named.

"I'd expect this to be received positively by the market and investors," he added.

Thompson has been chairman of 3i Group Plc since 2015 and was chairman of Tullow Oil Plc from 2012 to 2017. Earlier in his career, he held investment banking positions at S.G. Warburg and N M Rothschild.

FOCUS ON RETURNS

Rio Tinto on Monday also reduced its forecast for capital expenditure, putting 2017 capex at less than $4.5 billion from an earlier forecast of $5 billion, as it focuses on boosting shareholder returns.

The company said that it will deliver additional free cash flow of $1.5 billion a year from 2021, following on from its drive to boost free cash flow by $5 billion over 2017 to 2021.

It pointed to a possible slowing in China over the next six months, with a weakening in construction, infrastructure and automotive demand growth, but said it remains optimistic about China in the medium to long term.

The miner said it expects to ship 330 million to 340 million tonnes of iron ore from its Pilbara operations in 2018, slightly ahead of its forecast of 330 million tonnes for this year.

Shares of Rio Tinto rose 1.6 percent in early trade in a flat broader market. (Reporting by James Regan and Shashwat Pradhan in Bengaluru; Editing by Richard Pullin)