SYDNEY (Reuters) - Rio Tinto said on Tuesday it could match last year’s $2.7 billion (2.1 billion pounds) cash return to shareholders in 2017 even if iron ore prices plummet to near record lows of $42 a tonne.
Rio, which counts on iron ore to generate more than two-thirds of its revenue, has recorded an average price so far this year of $74 a tonne, which is 38 percent higher than 2016’s annual average price.
“In 2016, we returned $2.7 billion dollars - or 28 percent of our cash - to our shareholders,” Rio Tinto Chief Executive Jean Sebastien Jacques said in a speech to be delivered later on Tuesday to a mining conference in Barcelona. Reuters obtained an advance copy of the speech.
Jacques said last year’s cash return was achieved at an average iron ore price of $53.60, adding: “The average year to date has been $74 so a price of $42 for the rest of the year will give us a similar outcome.”
Iron ore last traded below $42 a tonne in January 2016. The price hit a record low $38.30 a tonne the previous month. The price last quoted on Monday was $60.80 a tonne.
Iron ore prices are set to remain on a downslope for at least the next half decade, averaging lower each year through to 2021 as Chinese demand cools faster than expected, though it is unlikely to revisit the lows of late 2015 and early 2016, according to BMI Research.
BMI forecasts iron ore will average $65 a tonne this year, $50 in 2018, and decline to $48 by 2019.
Reporting by James Regan; Editing by Miral Fahmy