Rio Tinto Rewards Shareholders With Special Dividend

By Glenn Dyer | More Articles by Glenn Dyer

Global mining heavyweight Rio Tinto will shower shareholders with $US3.5 billion ($A5.01 billion) in cash after surge in first half earnings thanks to the higher iron ore price.

The cash splash included a sharp lift in interim dividend to a record $US1.51 a share (up from $US1.27 a share) and a special 61 cents a share dividend on top of that.

The record interim will absorb $US2.5 billion and the special payout another $US3.5 billion. The net underlying profit of $US4.93 billion was the highest since 2014.
The surge in iron ore prices more than offset a fall in production and sales from the company’s huge Pilbara iron ore mines in the six months and also will help paper over the $US800 million write down in the book value of its Oyu Tolgoi underground copper mine in Mongolia where there has been a $US1.9 billion cost blowout and a delay of at least two years, perhaps more.

The impairment was expected, after Rio last month warned in its June quarter production report that there were problems at the Mongolian project with the geology and known mining conditions.

Sales revenue rose 9% to $US20.7 billion from the 2018 first half, excluding the $US800 million contribution from the Queensland coking coal assets sold in 2018.

Rio reported an interim profit before interest, tax, depreciation and amortisation (EBITDA) of $US10.3 billion, which easily topped market forecasts of around $US10 to $US10.1 billion. That was up 19% from the first half of 2018, excluding the $US600 million from the sold coal assets

Net earnings of $US4.1 billion were 6% lower than 2018 first half, mainly reflected the impairment of the value of Oyu Tolgoi.

The iron ore price has surged more than 50% in the wake of a dam collapse in Brazil on January 25 at a Vale mine in the south of the country that left almost 300 people dead or missing )Vale reported a loss for the June quarter yesterday, Sydney time, to go with the loss for the March quarter).

“We have delivered strong financial results with underlying EBITDA of $10.3 billion and EBITDA margin of 47 per cent. Our financial performance was driven by our Pilbara operations with a 72 per cent EBITDA margin, underpinned by strong iron ore prices,” said Rio Tinto chief executive Jean-Sébastien Jacques said in yesterday’s statement.

In its June quarter production report, issued last month Rio confirmed it iron ore cost of production guidance for 2019 had risen to $US14-15 a tonne from $US13-14 a tonne because of the slide in production and lowered guidance for the full year.

Rio’s exports this year will be down because of the impact of Cyclone veronica in march, fires at its Cape Lambert loading terminals in January and March and problems at its Brockman mining hub in the Pilbara which will see extra overburden moved to “improve mine performance and pit sequencing”.

Rio Tinto shares fell 1.1% to $97.81 ahead of the results which were issued after the 4pm close of the ASX.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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