Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Rio Tinto said it had reached an “inflection point” after producing what it called a “consistent and stable” first-half performance, as the Anglo-Australian miner refused to rule out looking at large takeovers.
The company reported a 3 per cent rise in underlying earnings before interest, tax, depreciation and amortisation to $12.1bn in the six months to June 30. A strong profit performance from its copper and aluminium operations offset a 10 per cent profit decline in its large iron ore division after a train derailment and drop in the price of the commodity.
Jakob Stausholm, chief executive, described the results as an “inflection point” after a decade of struggles and said Rio Tinto was in a strong position to deliver on a number of large projects that would drive future growth, including the Simandou iron ore development in Guinea, the Oyu Tolgoi underground copper mine in Mongolia and its Rincon lithium plant in Argentina.
Rio Tinto, one of the world’s largest mining companies, has seen its Australian rival BHP drive global moves to consolidate the sector. Stausholm said Rio Tinto had instead looked at smaller moves including the buyout of Oyu Tolgoi’s minority shareholders and investments in renewable energy. He said any deals had to add value. “That doesn’t mean I’m ruling out big M&A, not at all,” he added.
The Danish chief executive has retained a cautious approach. He said Rio Tinto had room to grow in copper, but the market for assets was “a little bit heated” and the company was not prepared to pay the prices that sellers expect. “It’s not an easy market to buy into,” he said.
Rio Tinto expects iron ore shipments to rise in the second half after a slow six months. Stausholm said he expected demand from China to remain “robust” as green energy, infrastructure and industrial demand offset weakness in the country’s property sector.
The outlook for other metals proved stronger, with underlying aluminium earnings up 38 per cent. Stausholm described demand for aluminium, an electric vehicle ingredient, as “relentless” and slightly stronger than copper.
Lachlan Shaw, an analyst with UBS, said in a note that Rio Tinto’s future growth projects were progressing well, but an unchanged dividend payment of $1.77 a share — equivalent to half its profit — looked slightly soft.
Stausholm remained confident that the Resolution copper mine in Arizona, developed with BHP, would go ahead despite public opposition from some indigenous groups and environmentalists. “We are making real progress there,” he said. “I think it’s a prospect that will happen but I can’t give you a timeline.”
The comments on Resolution come a week after the Australian government intervened to block the possibility of a uranium mine being opened in Kakadu National Park, due to long-term and staunch opposition from the local population.
Rio Tinto said it was pleased with the ruling, which infuriated minority investors that had pushed to develop the site.
Read the full article here
