A record-breaking profit result has allowed Rio Tinto to shower its shareholders in cash even as a slew of reputational and operational complications – and an uncertain outlook for iron ore prices – cloud the company’s horizon.
The world’s second-largest miner on Wednesday afternoon announced strong commodity prices had helped it hit a record $US21.4bn ($A29.6bn) in underlying earnings for 2021, allowing it to line investors’ pockets with a $US4.79 combined final and special dividend.
This brought the company’s full-year payout to a better-than-expected $US10.40 per share, a $US16.8bn ($A23.2bn) treasure chest nearly double the size of what it delivered to investors in 2020.
Rio said result was driven by a strong – if volatile – year for its main earner iron ore, while the company’s copper and aluminium operations also pitched in.
“The recovery of the global economy, driven by industrial production, resulted in significant price strength for our major commodities, which we were able to capture, achieving record financial results,” chief executive Jakob Stausholm told shareholders.
“We have a portfolio that is well positioned and are targeting disciplined investment in commodities that will see strong demand in the coming decades.”
Rio Tinto’s ASX-listed shares improved on Wednesday, climbing 1.2 per cent higher to $119.87 ahead of its after-hours earnings release.
The company is now back trading near six-month highs in the wake of a year-ending slide that matched cooling iron ore prices.
Rival BHP earlier in February had reported a similar earnings boost from strong commodity prices, paying a record $US7.6bn ($A10.5bn) interim dividend even as iron ore faded from its $US233 per tonne record over the back half of the year.
The bulk metal slipped below $US100/t late last year but rallied into 2022, rising to near $US150 per tonne before rumours of Chinese intervention in the market again cooled investors’ heels.
Rio on Wednesday said it managed to achieved an average iron ore price of $US132.3 per wet metric tonne, easily beating the $US91 average in 2020, and more than making up for rising costs and a dip in overall production in Western Australia’s Pilbara.
The company flagged that ongoing Covid-19 restrictions and a tight labour market had hampered its ability to access experienced contractors and particular skill sets during the year, while it found itself paying more for the diesel it uses to fuel its trucks, trains and ships.
General price inflation resulted in a $US690m hit to underlying earnings while there are likely to be other costs in 2022, with iron ore and copper unit costs expected to leap as labour and input prices rise, and processing plant maintenance ramps up.
The company’s 2022 production and cost forecasts also assumes there will be no further government-imposed Covid-restrictions or mass outbreaks at its operations, while it acknowledged it was at the mercy of tight labour markets, further inflationary pressures and supply chain delayxjmtzyws.
The $180bn company – which is also listed in London – has already flagged a number of operational hurdles in 2022, including a predicted clean-up cost blowout at the Ranger uranium mine in the Northern Territory’s Kakadu, operated by its majority-owned Energy Resources of Australia.
Rio in January also had its Jadar lithium project in Serbia nixed by the country’s government, although underground operations are now advancing at the massive Oyu Tolgoi copper and gold project in Mongolia.
Meanwhile, the company has committed to implementing all recommendations made in a scathing review into its culture.
Rio earlier this month published an internal report that revealed almost half of its workers had experienced bullying and nearly 30 per cent of women had been sexually harassed, while racism was a common occurrence at its worksites.
The review led by former Australian Sex Discrimination Commissioner Elizabeth Broderick was commissioned as part of a commitment by the miner to improve its cultural practices.
In 2020, Rio was dragged over the coals for destroying a sacred, ancient indigenous cave in WA.
