Rio Tinto digs deep to win investor approval
RIO Tinto is planning to hand investors nearly £ 4billion through higher dividends and buying back shares after countering falling metals prices by slashing costs and reining in spending.
The mining heavyweight set out its credentials for remaining independent after rejecting the takeover advances of FTSE 100 rival Glencore last year.
Although its annual earnings fell by 9 per cent to $ 9.3billion (£ 6billion), Rio said it would hike its full- year dividend payout by 12 per cent and buy back $ 2billion worth of shares.
This amounts to a total cash return of nearly $ 6billion, up 64 per cent on the previous year.
The company reduced its capital spending by over a third to $ 8.2billion and its debt came down by $ 5.6billion to $ 12.5billion by the end of December.
Chief executive Sam Walsh said: “Last year we made a clear commitment to materially increase cash returns to our shareholders and we have delivered this.
“Our continued fi nancial and operating discipline enabled us to offset much of the impact of lower commodity prices in 2014.
“With lower commodity prices and uncertain global economic trends, the operating environment remains tough.
“However, in these conditions Rio Tinto’s qualities and competitive advantages deliver superior value.
Big mining fi rms have come under pressure to curb their previous lavish spending during the commodities boom and show greater fi nancial discipline after writing down the value of assets by billions of pounds to refl ect the sharp drop in metals such as iron ore.
Walsh said capital spending, which peaked at over $ 17billion in 2012, would be less than $ 7billion this year and would remain at this level in 2016 and 2017.
Bernstein analyst Paul Gait said: “Rio was once held up as the paragon of the value- focused miner.
“We believe that the recent flirting with more esoteric strategies was an aberration rather than the norm and that the Rio of today is in the process of return to its august heritage.”
Rio shares rose 68p to 3039 ½ p.