Praveen Menon

(Reuters: Rio Tinto, NYSE:), posted Wednesday its greatest ever annual profit. It also reported a record dividend for the full year of $16.8billion. The increase in iron ore price and high demand from China were key factors.

These stellar results are the culmination of a difficult year for the largest iron ore producer in the world. While demand for their main product increased as the global economy recovered from the coronavirus, inflation and Chinese price control were headwinds.

Rio suffered poor reputation due to a scandal about its workplace culture. Serbia closed down a lithium plant, which was a promising area for growth. The positive side is that it settled a long-running dispute regarding a huge Mongolian copper/gold mining project.

For the year ending Dec. 31, Anglo-Australian mining company reported underlying earnings in excess of $72 billion, up 72% over a year ago. Visible Alpha says analysts expected to see underlying earnings around $21.63 billion.

After the announcement, Chief Executive Jakob Stausholm stated that “our balance sheet has been the most robust it’s ever been in at least fifteen years.”

Rio Tinto has declared its final special dividend. It was 62cs per share. The final dividend is $4.17. That’s higher than the $3.09 year-earlier final dividend. Rio Tinto’s total 2021 dividend now stands at $10.40 per shares.

Its shares were up 1.2% at the Australia Stock Exchange in advance of the results. However, share prices in London were 0.3% lower at 1042 GMT than other miners.

After reporting an estimated-beating first half profit, Rival BHP Group (NYSE 🙂 has also announced a record payout in dividends.

Australian miners have been affected by labour shortages caused COVID-19 curbs. Rio had previously predicted that 2022 would see lower-than-expected ironore shipment.

Steve Clayton, fund manager for HL Select, said that “the going gets a little tougher from here with inflation starting to push prices higher.”

“We anticipate that the payout in FY2022 will be lower due to less favorable operating circumstances, however it will still provide attractive yields to shareholders.”

China is the largest contributor to Rio’s revenues, accounting for nearly half. But, implementation details are still unknown.

Stausholm did not comment on China’s actions, but said that no official communication had been made.

Asked by analysts about big M&A opportunities, Stausholm said he would “be very cautious right now”.

He said, “…We are quite high up in this cycle. I dream of looking back and saying that we had invested anti-cyclically. However, making acquisitions now might be pro-cyclical.

REVIEWING OPTIONS

Rio stated in the results statement that it is committed to exploring all possibilities in Serbia. Serbia had shut down its Jadar lithium-ion project, worth $2.4 billion.

It said it was reviewing the legal foundation of the decision and its implications for activities in Serbia.

Stausholm stated that the decision is up to Serbia’s government to make whether or not they wish to see this possibility become a reality. “Right at this point, we’re offering meaningful engagement with stakeholders.”

Stausholm was promoted to the position of CEO in response to a backlash. The company had blasted 46,000-year-old Juukan Rock shelters for expanding an iron ore mine.

A review by an outsider of the culture in the miner’s workplace was released last month. It revealed that there is a culture of harassment, bullying and racism. 21 cases of sexual assault or actual rape were reported over the course of five years.

Stausholm stated, “We are more humble and better listeners as we get the full Juukan Gorge learnings.”