mining & energy

Rio returns cash to shareholders as it swings to FY profit

Wednesday, 08 Feb 2017

Diversified miner Rio Rinto will return some $3.6-billion in cash to shareholders after swinging to a full-year profit. The group posted a net profit of $4.62-billion for the 2016 financial year, ended December 31, compared with a net loss of $866-million the year before.

Lower commodity prices had resulted in consolidated sales revenue for the full year dropping by $1-billion, to $33.8-billion, but underlying earnings rose by $600-million, to $5.1-billion, on the back of $1.2-billion in cost improvements.

Although the lower commodity prices had impacted the bottom-line, Rio noted that movements in sales volumes had lifted earnings by $19-million compared with 2015, with volume gains reported in iron-ore, following the increase in capacity at the company’s Pilbara ports and mines; in bauxite, from increased production at all four mines; and, in aluminium, following record production at ten smelters.

However, the increase in volumes for iron-ore, bauxite and aluminium were offset by lower sales volumes in copper, gold and molybdenum.

CEO Jean Sebastian Jacques said on Wednesday that the results showed that the company had kept its commitment to maximise cash and productivity from its assets, delivering $3.6-billion in shareholder returns while maintaining a robust balance sheet.

Rio had announced a dividend of $1.70 for the full year, equivalent to $3.1-billion and will buy back some $500-million worth of shares between March and December this year.

"We enter 2017 in good shape. Our team will deliver $5-billion of extra free cash flow over the next five years from our productivity programme. Our value-over-volume approach, coupled with a robust balance sheet and world-class asset, places us in a strong position to deliver superior shareholder returns through the cycle," Jacques said.

As for growth projects, Rio’s immediate focus will remain on the Silvergrass iron-ore project, in the Pilbara, the Oyu Tolgoi underground copper development, in Mongolia, and the Amrun bauxite project, in Queensland.

The miner has set aside $338-million to develop the Silvergrass mine, adding ten-million tonnes a year of capacity to maintain the Pilbara blend and to lower unit costs, with commissioning expected in the second half of 2017.

Some $5.3-billion will be spent at Oyu Tolgoi, with first tonnage from the mine expected in 2020, and average production expected to reach 560 000 t/y between 2025 and 2030.

At Amrun, Rio will spend $1.9-million to develop the ten-million-tonne-a-year operation, with first production and shipping expected to start in the first half of 2019.

Credits: Esmarie Swanepoel/Mining Weekly