(Bloomberg) — Rio Tinto Group, the world’s largest iron ore miner, reported its highest provisional gain ever and will pay out $9.1 billion in dividends as the company and its global competitors benefit from higher commodity prices this year.
Rio is the first of the major companies to report earnings and kick off its reporting season and is expected to see record results across the board. The industry has been one of the biggest beneficiaries of the world’s efforts to get out of the pandemic. Trillions of dollars in recovery packages have ignited demand for commodities like iron ore and copper, sending prices up sharply and inflationary pressures roiling the global economy.
Wednesday’s results are also the first period under unused CEO Jacob Stasholm, who was appointed following Jean-Sebastien Jacques left the company due to the backlash over Rio’s destruction of the ancient Indigenous site final year. An increase in commodity prices means the unused chief is in lofty esteem for Rio, even as the company grapples with a series of production setbacks that have crippled its operations in recent years.
The disruptions caused by Covid, and in particular the company’s aptitude to move workers to its sites, added to problems in the first half, particularly in connection with the development of the copper project in Mongolia and in the major profitable iron ore mines in Western Australia. The Rio copper business also saw a drop in production as the Covid virus took a toll.
“In the first half we experienced a lot of instability in operations. We must sharpen the consistency of our performance.” Or where we want it to be.”
Stausholm also sounded a cautious note on the outlook for commodity demand in China’s largest consumer.
“China’s lengthy-term potential remains sound, but we may have seen an unsustainable lofty level of industrial development in some months in the first half of this year,” he told reporters by telephone.
Rio shares fell 0.6% in London, in line with a broader decline among most of its peers.
The company announced that its core gain for the first half more than doubled to reach $12.2 billion over the alike period final year with the rise in iron ore and copper prices. The half-year payout — which includes a $3 billion exceptional dividend — is more than the mining giant’s return to shareholders for the packed year of 2020 and higher than analysts had expected.
As Rio pays record amounts to shareholders, the company indicated this week that it is also keen to invest in increasing production in essential commodities — particularly those that will benefit from the world’s shift toward green energy.
The company announced Tuesday that it plans to spend $2.4 billion to build a lithium mine in Serbia. While this is the first major move by a major miner to lithium, used in rechargeable batteries, the investment reflects a continuing shove by the world’s largest miners toward “coming-facing” goods such as battery metals or fertilizers, at the alike time. Which industry is moving to get rid of fossil fuels.
“Rio appears to be shifting from austerity and capital returns to a greater focus on growth,” Christopher Lavimina, Jefferies analyst, wrote in a note. “While Rio has had some operational issues in this period, the big picture here is that these are excellent financial results.”
(Updates with comments from the CEO in the fifth paragraph.)
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