Rio Tinto (NYSE:RIO) Pays $9.1 Billion Dividend on Record Profits

Pilbara operations, social distancing during COVID-19. Source: Rio Tinto

Rio Tinto (NYSE:RIO) announced record earnings and dividends today as commodity prices continue to surge as the global economy starts to reopen. The company paid out over $9.1 billion in dividends to shareholders. The company’s stock also showed massive signs of growth, rising by 3% in the same day and moved up to a $138 billion market capitalization.

The rise in profits for the Anglo-Australian iron-ore mining company has been spurred on by rising demand for raw materials over the past year. According to recent reports, the average iron ore price rose to nearly $168.40 per dry metric ton, a near doubling from the raw price in 2020. This massive growth in price helped the miner’s yearly earnings increase from $4.75 billion in 2020 to nearly $12.17 billion in 2021, which was much higher than any analyst predicted.

Success Amid Disruption

Rio Tinto specializes in iron ore production, the key raw material necessary for the production of steel. The demand has been particularly from high China, who is one of the largest iron ore consumers on the planet. This is only projected to increase as China pushes for massive infrastructure development projects and as Brazil continues to struggle with supply problems, driving the price of steel through the roof.

The results on Wednesday also came during a transitional period for the company, after its former chief executive Jean Sebastian Jacques controversially stepped down last year. Since the new Chief Executive Officer Jakob Stausholm took over, the surge in prices have boded well for Rio Tinto’s future even as it struggled with some internal production issues.

Many of these production issues are similar to the ones many other manufacturers have dealt with during the COVID-19 pandemic. Due to restrictions on non-essential labour in numerous countries, the company has often found it difficult to get their workforce on site, which led to massive issues in its copper development project in Mongolia and its iron ore mining production in Western Australia. 

Rio Tinto’s CEO recently stated: “In the first half we experienced too much operational instability. We have to sharpen the consistency of our performance. While today’s results clearly demonstrate the underlying quality of our asset base, our operational performance clearly is not where it has been in the past or where we want it to be.”

Green Vision

The company aims to further use their profits not only to fill the pockets of shareholders, but to invest in production capabilities in newer green energy projects. Just this Tuesday, it announced a massive $2.4 billion spending initiative for a lithium mine in Serbia. Lithium is one of the primary materials used for rechargeable batteries and aims to diversify their product lines. 

Jefferies analyst Christopher La Femina commented on the company’s plans, saying: “Rio appears to be shifting from austerity and capital returns to more of a focus on growth. While Rio had some operational issues in the period, the big picture here is that these are stellar financial results.”

With the promising dividends and growth in raw materials prices and their increased infrastructure investment, Rio Tinto’s massive profits could continue to grow for 2021.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above. 

By Matthew Evanoff

I cover the mining industry and the best mining stocks around the world. I write about industry news, individual companies, projects, management, and profiles on industry leaders.

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