Rio Tinto to pay $9.1bn dividend as income growth on iron ore demand

Rio Tinto PLC updates

Signal as much as myFT Every day Digest to be the primary to find out about Rio Tinto PLC information.

Rio Tinto reported document half-year income that topped its complete for all of 2020 as the worth of its key commodity iron ore hit an all-time excessive on the again of booming demand from China.

The robust earnings development enabled the Anglo-Australian firm to reward shareholders with the most important half-year payout in its historical past: dividends of $9.1bn, or $5.61 a share.

The income and dividend spotlight the large quantities of money being generated by the mining business, which has been one of many greatest beneficiaries of China’s speedy financial restoration from the coronavirus pandemic and large stimulus packages introduced by governments worldwide.

Rio’s friends, together with Anglo American, BHP, Glencore and Vale, are additionally anticipated to ship blockbuster outcomes and money returns once they report over the subsequent month.

Primarily based on manufacturing and commodity worth forecasts, PwC expects the world’s high 40 miners to document after-tax income of $118bn in 2021, up 68 per cent from the earlier yr.

In distinction to earlier cycles, huge diversified miners have resisted the temptation to put money into formidable new tasks and improve provide, partly due to few growth choices, significantly in metals resembling copper. Consequently, huge miners are producing document ranges of money.

Rio mentioned internet revenue rose 271 per cent to a document $12.3bn within the six months to June on revenues of $33bn. Income had been increased than anticipated by analysts, and $2.5bn bigger than Rio achieved in all of 2020.

The corporate can pay out 75 per cent of its earnings as dividends because it swung to a internet money place of $3.1bn from internet debt of $664m on the finish of 2020. Its said dividend coverage is to pay out 40 per cent to 60 per cent of earnings.

Alexander Pearce, analyst at BMO Capital Markets, mentioned Rio’s dividend announcement set a “optimistic precedent for shareholder returns from its friends”.

Iron ore was Rio’s most important driver of income, accounting for nearly 85 per cent of internet revenue. The corporate is the world’s greatest producer of the commodity, which hit an all-time excessive above $233 a tonne in Could amid demand from China, which has churned out document quantities of metal this yr. Though the worth has eased, it stays round $200 a tonne, nearly 90 per cent increased than 12 months in the past.

Booming iron ore costs helped divert consideration from a weak operational performance. The amount of iron ore shipped from Rio’s mines within the Pilbara area of Western Australia fell 12 per cent yr on yr within the three months to June due to adversarial climate circumstances, labour shortages and a new approach to cultural heritage.

Rio final yr blew up two historical aboriginal rock shelters to make method for a mine growth, drawing worldwide condemnation and the resignation of then-chief government Jean-Sébastien Jacques.

“We’re making progress on our 4 priorities, figuring out alternatives for operational enchancment, advancing our ESG agenda, taking essential funding choices and stepping up our exterior engagement,” mentioned chief government Jakob Stausholm.

Outdoors of Australia the corporate is struggling to develop Oyu Tolgoi, an enormous underground copper mine in Mongolia’s Gobi desert, due to disagreements with the federal government. It has additionally been pressured to curtail operations at its Richard Bay Minerals enterprise in South Africa due to safety points.