Rio Tinto Profit Jumps as China Sends Iron Ore Prices Surging

(Bloomberg) -- Rio Tinto Group, the world’s top iron ore producer, reported a 20% jump in annual profit on a surge in prices for the raw material, while also boosting its returns to shareholders.

• Full-year underlying earnings were $12.4 billion, according to a company statement Wednesday. That compares with the median estimate of $11.9 billion, based on a survey of 21 analysts.
• The company will pay a total dividend of $5.57, including a special dividend of 93 cents, representing a full-year payout ratio of 72%.

Key Insights

• “Our strong operational performance in the Pilbara in 2020 enabled us to take advantage of the rising price environment for our high-quality products,” Rio said in a statement. “This price strength was driven by buoyant demand from China and constraints in global seaborne supply.”
• Iron ore prices rose about 70% over 2020 as stimulus measures from the Chinese government to accelerate the economic recovery from the pandemic stoked strong demand from the country’s steel mills, and weak production in Brazil curbed supply.
• This is Chief Executive Officer Jakob Stausholm’s first earnings report since becoming CEO on Jan. 1. He replaced Jean-Sebastien Jacques, who was forced to step down last year following an investor backlash after blasts at Juukan Gorge damaged ancient Aboriginal sites in the Pilbara.
• “Working closely with the board, we must earn the right to become a trusted partner for Traditional Owners, host communities, governments and other stakeholders,” Stausholm said in a media release.
• Rio said it was in “active discussions” with the government of Mongolia to address and close all outstanding issues over its Oyu Tolgoi copper project, “and increase the project’s benefits to all stakeholders.”
• The Mongolian government has asked Rio whether it’s prepared to mutually terminate the $6.75 billion project in the Gobi Desert, the Financial Times reported earlier this month.
• Rio expects to complete the first phase of technical work at its Simandou iron ore project in Guinea in the first half of 2021.

Market Reaction

• Rio’s shares rose 13% over 2020, compared to a 9% gain for its main rival BHP Group. The earnings result was published after the close of trade in Australia on Wednesday.

Get More

• For more details on the earnings data, click here
• Read the statement here

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