Rio Tinto Rewards Investors as Profit Rebounds on Iron Rally – by Jesse Riseborough and Perry Williams (Bloomberg News – February 8, 2017)

Rio Tinto Group will pay a much higher dividend than expected and buy back $500 million of shares after the world’s second-biggest mining company reported the first gain in annual profit since 2013.

Higher iron ore prices boosted underlying profit 12 percent to $5.1 billion in 2016, London-based Rio said on Wednesday. That beat the $4.75 billion average estimate of analysts compiled by Bloomberg.

The dividend fell 21 percent to 170 cents a share, reflecting a new policy aligning the payout to earnings. Still, that exceeded the average estimate of 136 cents in the Bloomberg survey and the company’s minimum payout of 110 cents. Rio will purchase U.K.-listed shares throughout this year.

“What a difference a year makes,” Peter O’Connor, an analyst at Shaw & Partners Ltd. in Sydney, said in a note. “It’s been a long grind back from the global financial abyss that Rio slumped into. But it certainly looks and feels like the ’old school’ Rio swagger is back.”

The global mining industry is rebounding from a downturn that forced some of the top producers to sell assets, cut costs and rein in spending after years of over-investment bloated balance sheets and left markets oversupplied. Iron ore, Rio’s main profit driver, surged 81 percent last year as Chinese stimulus supported local steel output, leading to better demand for overseas ore.

For the rest of this article, click here: