Rio Tinto will shower shareholders with billions of dollars in cash with a record final dividend for 2019 to go with the earlier record interim as high iron ore prices helped the company maintain earnings at a high level.
Global iron ore prices have gotten their second boost in a week after Rio Tinto revealed that Cyclone Damien caused so much damage to the company’s Pilbara mines that it has lopped six million tonnes from the miner’s projected 2020 output.
Rio Tinto might be forecasting production growth for its key WA iron ore operations for 2020, but any increase will be marginal compared with 2019 and the mooted target still remains under the optimistic 350 million tonnes set a year ago for 2019.
The mini investment boom in the Pilbara iron ore province of WA continues with Rio Tinto approving a $1 billion $US749 million investment in its existing Greater Tom Price operations (100% owned) operations to extend the life of the mine.
Citi estimates global growth will be modestly higher in 2020, which is bullish for commodities. The broker is positive about hard coking coal in the first quarter of 2020, expecting the price to average US$170/t over the year.
Macquarie has tweaked its iron ore shipment expectations for Rio Tinto, lifting 2019 slightly but reducing 2020 slightly on a slower ramp-up at Koodaideri. The completion of Rio's new iron ore developments should reduce costs in the medium term, the broker suggests, but for now expected costs rise 10%.
Cash returns to shareholders in the first half exceeded Morgan Stanley's expectations and imply a total payout ratio of 70% and a base dividend pay-out of 50%. Operating earnings were slightly ahead of estimates.