Australia’s biggest mining company, Rio Tinto (ASX: RIO), has reported strong half year results for the period to 30 June 2021 this morning, and has subsequently paid out $12.4b in dividends to shareholders.
Rio Tinto Group engages in exploring, mining, and processing mineral resources worldwide. The company offers aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and uranium. It also owns and operates open pit and underground mines, mills, refineries, smelters, power stations, and research and service facilities.
Rio reported underlying earnings of US$12.16 billion for the half, exceeding analyst expectations and putting it on track for its most profitable full-year result ever come February. The company’s strong performance in this half year can primarily be contributed to high iron prices (caused by supply constraints and bottlenecks) coupled with heightened demand for iron ore as manufacturing ramps up as economies reopen. The iron ore spot price now sits at ~$214 a tonne, a multi-decade high and a significant increase from a year ago when the commodity traded at ~$120 a tonne. Meanwhile, demand for the commodity remains high (specifically from China), with manufacturing PMI data sitting at 60+ in most developed nations, representing a strong expansion in economic activity.
While iron ore was the primary catalyst of the strong result, other divisions within the company contributed significantly too, namely their copper segment, which contributed to ~10% of group EBITDA in 2021 (vs ~6% in 2020) on high commodity prices. However, Rio’s copper division faces the prospect of higher taxes in Chile and Peru, massive cost blow outs and government tensions in Mongolia and a challenging relationship with traditional owners in the US state of Arizona.
Rio shareholders will receive a total of US$5.61 a share in ordinary and special dividends for the half. This represents a dividend yield of 4.23% given the last closing price of $132.56 as at 28/07/2021. The market responded positively to the news, with the share price rallying 2.5% at the open.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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