Swimming in Cash, Rio Boss Backs Controlled Risks to Build Miner

Rio Tinto Group’s new boss said it’s time for the miner to stop being so risk averse about building its business, but that doesn’t mean big deals are imminent.

Rio has been generating super-charged profits in recent years from its giant iron-ore operations and has funneled the majority of that back to investors, including a record $9 billion in dividends announced Wednesday. The No. 2 miner’s balance sheet strength -- it has just $700 million of debt -- has led to speculation it could embark on a dealmaking spree after undertaking no significant acquisitions in more than a decade.

Yet Chief Executive Officer Jakob Stausholm, who took the helm last month after the destruction of an ancient Aboriginal site led to the ouster of his predecessor, said the company must first strengthen its own development team before looking to do big deals.

Swimming in Cash, Rio Boss Backs Controlled Risks to Build Miner

“We need to have the capabilities to develop things and integrate them well if we want to go down a path of buying assets, so it’s not imminent,” Stausholm said in an interview. “We do need to take some controlled risks to develop our portfolio of the next decade.”

Successive Rio CEO’s have been reluctant to do any major deals after disastrous aluminum and coal acquisitions a decade ago. The miner also has made limited progress in recent years on developing key growth projects, including copper, lithium and iron ore assets in, respectively, the U.S., Serbia and Guinea.

Anti-Cyclical

Mining companies have surged to multiyear highs, buoyed by a rally in commodity prices as the global economy pulls out from the coronavirus-induced slump of 2020. That’s seen metals like copper hit an eight-year high and iron ore surge, while Rio itself is trading at the highest on record. That boom might in itself make deals harder for Stausholm.

“The key thing is to try to be careful to not be too pro-cyclical and try to be little bit anti-cyclical,” he said. “Right now you see that the cycle is running our way and we need to be a little bit careful.”

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