Rio Tinto to buy back $500m of its shares

RIO TINTO Group will pay a much higher dividend than expected and buy back $500 million (R6.69 billion) of shares after the world’s second-biggest mining company reported the first gain in annual profit since 2013.

Higher iron ore prices boosted underlying profit 12 percent to $5.1bn in 2016, London-based Rio said yesterday. That beat the $4.75bn average estimate of analysts.

The dividend fell 21 percent to 170 cents a share, reflecting a new policy aligning the payout to earnings. Still, that exceeded the average estimate of 136c in the survey and the company’s minimum payout of 110c. Rio will purchase UK-listed shares throughout this year.

“What a difference a year makes,” Peter O’Connor, an analyst at Shaw & Partners in Sydney, said. “It has been a long grind back from the global financial abyss that Rio slumped into. But it certainly looks and feels like the ’old school’ Rio swagger is back.”

The global mining industry is rebounding from a downturn that forced some of the top producers to sell assets, cut costs and rein in spending after years of over-investment bloated balance sheets and left markets oversupplied. Iron ore, Rio’s main profit driver, surged 81 percent last year as Chinese stimulus supported local steel output, leading to better demand for overseas ore.

Kept promises “Rio is in good shape today,” chief executive Jean Sebastien Jacques said after the results. “We have kept our promises. We have delivered cost savings. We have strengthened the quality of our portfolio. We are investing for the long term and at the same time we have strengthened our balance sheet.”

The company was in a “strong position to deliver superior shareholder returns”, he added.

Rio shares rebounded from a seven-year low to rally 60 percent in London in 2016. The stock is up 9 percent this year and reached an almost fouryear high in late January. – Bloomberg