Rio’s $7 Billion Windfall Points to Mining’s Lesson Learned – by Thomas Biesheuvel, David Stringer and Martin Ritchie (Bloomberg News – August 1, 2018)

Rio Tinto Group’s $7 billion pledge to shareholders is the latest sign the world’s biggest miners are resisting the temptation to backslide.

The mining industry has undergone a dramatic makeover since the end of the last commodity boom. Investors and management remain wary of pricey deals after much of the sector got burned by overpaying for assets and few among the largest producers see the need for major new supply growth.

Rio is generating massive amounts of cash even as cost pressures rise, and its low debt levels mean the No. 2 miner has financial capacity to move on acquisitions or projects. For now, it’s holding fire.

The company announced a record $2.2 billion interim dividend, said it would buy back an additional $1 billion of shares and approved plans to hand investors about $4 billion of proceeds from asset sales.

“We’re not going to do anything stupid,” Chief Executive Officer Jean-Sebastien Jacques told analysts Wednesday. “We’re not under pressure to grow.” One area where Rio and its peers remain keen on expansion is copper. The company is already expanding a huge copper mine in Mongolia and a study on the Resolution project in Arizona, a joint venture with BHP Billiton Ltd. will be completed by 2021.

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