Rio Tinto to pay $7.7bn final dividend after bumper profits

Rio Tinto (RIO.L) posted bumper annual profits and said it would pay shareholders a record final dividend of $7.7bn (£5.6bn) as it cashes in on soaring commodity prices.

Profits surged 72% on 2020, reaching the highest levels in the company's 149-year history, as iron ore earnings roughly doubled.

The firm paid out a total dividend for 2021 worth $16.8bn – a record for the miner and one of the largest in UK corporate history.

The FTSE 100 (^FTSE) mining giant announced it reaped annual underlying earnings of $21.4bn in 2021 thanks to surging iron ore prices and strong demand from China.

Underlying ebitda (earnings before interest, tax deprecation, and amortisation) rose 58% compared to 2020 to $37.7bn, on revenue of $63.5bn. It ended the year with a net cash position of $1.6bn.

Ebitda is a measure tracked by analyst, and the results were broadly in line with market expectations

Iron ore hit a record of over $230 a tonne in May, however, prices in the commodity have been volatile.

The commodity retreated to the mid $80s in the second half of last year as China reined in the output of its steel makers to meet stricter environmental standards. The market has since rallied, touching $150 earlier in 2022 after monetary easing and relaxed climate targets raised confidence in robust Chinese steel output in the coming year.

Rio Tinto CEO Jakob Stausholm said "the recovery of the global economy, driven by industrial production, resulted in significant price strength for our major commodities" and allowed for the results.

The London-based group expects the cost of production at its Pilbara iron ore business in the range of $19.50 to $21 per ton in 2022, compared to $18.60 per ton in 2022.

Looking ahead it expects capital expenditure of about $8bn this year, rising to around $9bn to $10bn in 2023 and 2024.

Read more: Barclays to buy back £1bn of shares and raise dividend as profits soar

Shares in the company declined 0.2% on Wednesday morning in London.

Graph: Yahoo Finance

It comes as the Anglo-Australian miner is reeling from a damning report detailing a culture of racism and harassment and claims of sexual assault at the company.

Stausholm who took the reins at the company just over a year ago, published the report and has also been working to overhaul the miner's reputation after it destroyed an ancient Aboriginal site in 2020.

Rio Tinto also announced plans to diversify its business. "Our agenda is an ambitious, multi-year journey which we are determined to deliver and we have already taken the first steps, with underground operations under way following the Oyu Tolgoi agreement and a binding agreement to acquire the Rincon lithium project in Argentina," Satusholm said.

Mining companies have emerged as dividend-paying stalwarts of the London stock market since the coronavirus pandemic.

Glencore (GLEN.L), the world’s biggest miner, announced a $4bn payout, while BHP (BHP) recently posted strong results and declared a record $7.6bn half-year dividend, and Chile-focused miner Antofagasta (ANTO.L) reported a record dividend of $1.4bn earlier this week.

Watch: Why are gas prices rising?

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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