Belfast Telegraph

Iron ore price hike to help Rio Tinto investors cash in on shares

Investors in Rio Tinto are in line for a cash windfall after surging iron ore prices helped the mining giant dig out a hefty jump in profits.

The Anglo-Australian firm unveiled a 1 billion US dollar (£756 million) share buy-back, as underlying earnings soared by 152% to 3.9 billion US dollars (£2.9 billion) for the half year.

The move was topped by a record interim dividend of 110 cents a share, the equivalent to 2 billion US dollars (£1.5 billion) and a 144% rise on last year.

Rio Tinto, which employs 50,000 people across the globe, said iron ore earnings lifted 87% to 3.3 billion US dollars (£2.5 billion) over the period, as rising commodity prices boosted returns.

Pre-tax profits also soared 136% to 4.9 billion US dollars (£3.7 billion) for the six months ending in June, up from 2.1 billion US dollars (£1.6 billion) in 2016.

Chief executive Jean-Sebastien Jacques said: "Today we have announced total cash returns to shareholders of 3 billion US dollars (£2.3 billion).

"By driving performance, focusing on cash and allocating it with discipline we are delivering superior cash returns to our shareholders.

"These are strong results: operating cash flow was 6.3 billion US dollars (£4.8 billion) and we met our 2 billion US dollar (£1.5 billion) cash cost reduction target six months early.

"We are now shifting gear to focus on the untapped value from our productivity programme and continue to strengthen our portfolio to build higher returns for the future."

The company said it had sold its Australian thermal coal business for 2.7 billion US dollars (£2 billion), while its iron ore and bauxite projects in the country continued to make "good progress".

It also made headway in driving down its debt pile, with net debt falling 21% to 7.6 billion US dollars (£5.7 billion) over the period.

However, shares were down more than 2% in morning trading on the London Stock Exchange, as the results came in shy of expectations.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "There's some disappointment in today's numbers - which don't quite match up to what the market had been expecting.

"However, the more important takeaway for many investors will be the sizeable cash returns the group has announced.

"With debts now firmly back in hand, Rio is in a position to pass the benefits of higher commodity prices back to shareholders, and today highlights the long term dividend paying potential of the mega mining groups."

Rio Tinto mines for aluminium, copper, iron ore and diamonds in 35 countries around the world.