Rio Tinto Is Digging Mostly Into Its Pocket – by Clara Ferreira Marques (Bloomberg News – February 26, 2020)

https://business.financialpost.com/

(Bloomberg Opinion) — A combination of hefty dividends and contracting output is turning the world’s second-largest miner into the poster child for a $1.5 trillion industry’s growth quandary.

Rio Tinto Group announced a record $3.7 billion final dividend Wednesday, adding to $11.9 billion of cash returns already paid in 2019. Yet it produced less iron ore, copper and aluminum, leaving market prices to lift underlying earnings by 18%.

Rio’s Pilbara operations stumbled early in the year. Its Mongolian copper mine, a key source of future production and the basis of a greener portfolio, is now not only sorely overdue and over-budget, but also tangled in international tax arbitration.

The $86 billion mining giant isn’t alone. High dividend yields and pedestrian output have begun to define resources heavyweights that used to be known for the exact opposite.

Diversified groups relied on their varied sources of cash to expand, but large-scale opportunities are scarcer than ever, and portfolios look far less diverse too, once coal and other less appealing assets have been carved off. At Rio, iron ore now accounts for three-quarters of its underlying Ebitda.

For the rest of this column: https://business.financialpost.com/pmn/business-pmn/rio-tinto-is-digging-mostly-into-its-pocket

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