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Rio Tinto confident amid iron ore boom

Wednesday, February 08, 2017 - 01:42

Global miner Rio Tinto put its focus on returning cash to shareholders after beating profit forecasts on the back of cost-cutting and a strong recovery in iron ore prices. Laura Frykberg reports.

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Pleasing Rio Tinto shareholders, is no longer on the backburner. The world's second largest iron ore miner promising a bigger-than-expected annual dividend of $1.33 a share. A strong recovery in iron ore prices boosted earnings by 12 percent to $5.1 billion. And the company says it's already made cost savings of $1.6 billion towards its $2 billion target for this year and last. A change in fortune from the year before that - when it posted its worst underlying earnings in over a decade. The turnaround - is partly thanks to the world's largest commodities consumer. Relying on China too much though comes with a warning. SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "One factor that does make us very wary. The fast build up of debt. If we look at the commodities market, if you look at the steel producers specifically, what we saw in January, was an awful lot of demand for iron ore and coal to produce steel. But there are concerns because of pollution that some of the plants could be closed. That the demand for these commodities was being brought forward to proceed any closure." Other analysts agree Rio Tinto may be counting its chickens before they hatch. And that any drop in market demand might require the company to hold on to spare change. But its chief financial officer takes a brighter view. Saying it sends a strong signal to shareholders that the company had the capacity for big payouts.

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Rio Tinto confident amid iron ore boom

Wednesday, February 08, 2017 - 01:42