Rio Tinto posts record half-year earnings on iron ore surge

  • H1 underlying earnings up 156% to $12.17 bln
  • Dividend payout jumps 262%
  • Shares down 0.3%

MELBOURNE, July 28 (Reuters) - Rio Tinto (RIO.AX) logged a record first half performance on Wednesday, underpinned by soaring iron ore prices on strong demand from China, which led the global miner to pay out a bonanza of $9.1 billion in dividends.

Rio's half-year underlying earnings more than doubled from a year earlier as a massive infrastructure push by China, the world's top iron ore consumer, and supply problems in Brazil drove prices of the steel-making commodity to record highs earlier this year.

"It's an amazing result, even it is all driven by commodity prices," said Brenton Saunders, a portfolio manager at Pendal Group, a Rio investor.

Rio, the world's top producer of iron ore, said the average realised price for the commodity nearly doubled to $168.40 per dry metric tonne free on board from a year earlier. read more

The price jump helped drive the miner's underlying earnings to $12.17 billion from $4.75 billion a year earlier, beating a consensus of $12.01 billion from 14 analysts compiled by Vuma.

The company declared a special dividend of $1.85 per share and an interim dividend of $3.76 per share, beating expectations by around 6%, and more than tripling last year's total payout of $1.55 for the first half.

"We expect another sizable dividend from Rio in 2H (the second half) as well. The capital return story here is compelling," Jefferies analysts said in a note.

The Rio Tinto logo is displayed on a visitor's helmet at a borates mine in Boron, California, U.S., November 15, 2019. REUTERS/Patrick T. Fallon

Rio appears to be shifting from austerity and capital returns to more of a focus on growth, as it has committed to its $2.4 billion Jadar lithium-borates project.

Rio Tinto brought forward its investment decision that was expected later in 2021, given the strong demand for the raw material for electric vehicle batteries.

"It's such a low cost and large deposit there, we are trying to bring it to market as soon as we can," Rio Tinto Chief Financial Officer Peter Cunningham told Reuters.

Still, after a less than stellar operational first half, which Rio blamed on poor weather and COVID-19 restrictions, Rio is in danger of losing its crown as the world's largest iron ore producer to Vale (VALE3.SA), after guiding to production at the lower end of forecasts this year.

"We do think the second half is going to be stronger," said Cunningham. "We certainly feel it was a tough first half, but we certainly feel that we are coming through that," he said.

Cunningham declined to comment on whether the miner had been contacted by regulators after a report by the Financial Times that Britain's financial watchdog is conducting a probe into its $6.75 billion underground copper project in Mongolia.

Rio Tinto shares were down 0.3% in London, but were outperforming rival BHP Group's (BHPB.L) shares, which were down 1.5%.

Reporting by Melanie Burton in Melbourne, Nikhil Kurian Nainan and Sameer Manekar in Bengaluru; Additional reporting by Clara Denina in London; Editing by Sriraj Kalluvila and Sonali Paul

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