Pil­bara drives Rio re­bound

Pilbara News - - News - Stu­art McKin­non

Rio Tinto will hand out a record in­terim div­i­dend and make an un­ex­pected $US1 bil­lion ex­pan­sion of its share buy­back pro­gram, driven mainly by Rio’s Pil­bara iron ore busi­ness and the strong price it re­ceived for its prod­uct in the first half.

The miner re­ported last Wed­nes­day un­der­ly­ing earn­ings of $US3.9 bil­lion ($4.9 bil­lion) in the six months to the end of June, up 152 per cent on its 2016 re­sult, but be­low an­a­lysts’ fore­casts of $US4.2 bil­lion.

In­vestors will be heart­ened by a $US3 bil­lion cash splash by Rio in the form of a record $US1.10 ($1.38) in­terim div­i­dend, rep­re­sent­ing a 50 per cent pay­out ra­tio, and a $US1 bil­lion ex­pan­sion of its ex­ist­ing $US500 mil­lion share buy­back pro­gram.

Rio’s Pil­bara iron ore op­er­a­tions again de­liv­ered the lion’s share of in­come, with un­der­ly­ing earn­ings of $US3.3 bil­lion, up 87 per cent on the same half last year, de­spite a 3 per cent dip in ship­ments to 154.3 mil­lion tonnes. The re­sult came on the back of a 42 per cent rise in the av­er­age price re­ceived for its ore to $US62.40/wmt, and fur­ther cash cost sav­ings.

The iron ore spot price hit a three­year peak of nearly $US95/t in Fe­bru­ary, be­fore dip­ping be­low $US55/t in late June. It was $US73.56 last Wed­nes­day. Cash costs across Rio’s Pil­bara op­er­a­tions fell to $US13.80/t in the first half, com­pared with $US14.30/t in the same pe­riod of 2016, de­liv­er­ing mar­gins of 69 per cent, com­pared to 58 per cent pre­vi­ously.

Chief fi­nan­cial of­fi­cer Chris Lynch said the com­pany had a mag­nif­i­cent as­set in its Pil­bara iron ore busi­ness, but re­jected sug­ges­tions the com­pany was over-ex­posed to the com­mod­ity.

He said the com­pany had light­ened its ex­po­sure to coal with the re­cent sale of its Coal & Al­lied busi­ness to Yan­coal for $US2.69 bil­lion, but its alu­minium as­sets were per­form­ing well and the com­pany was bullish on the prospects of its cop­per di­vi­sion.

Pic­ture: Tom Zaun­mayr

Iron ore stock­piles at Rio Tinto's Cape Lam­bert port fa­cil­ity near Wick­ham.

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