Pay day for Rio Tinto shareholders as half-year results show staggering earnings due to ‘exceptional market conditions’

A spike in commodities prices has propelled Rio Tinto’s earnings to staggering levels, netting shareholders a bumper dividend.

Mining giant Rio Tinto has chalked up record half-year financial results on the back of a stellar rally in commodities prices.

Net earnings rocketed 271 per cent to a staggering US$12.3bn ($A16.7bn) on the back of “exceptional market conditions”.

“Government stimulus in response to ongoing Covid-19 pressures has driven strong demand for our products at a time of constrained supply, resulting in a significant spike in most prices,” new chief executive Jakob Stausholm said in a statement from London, after the ASX closed on Wednesday.

The company declared a total interim dividend of $US5.61 ($A7.62) per share, representing 75 per cent of underlying earnings.

RBC Capital Markets said the special payout was 57 cents ahead of consensus estimates.

“At current prices, the potential for further returns at the full year remains high in our view and we think investors will take this payout positively,” RBC said.

Ord Minnett, however, said the dividend was in line with its estimate but the 75 per cent payout ratio was lower than it expected, given Rio Tinto’s healthy net cash balance.

“The company appears to be following the usual process of second-half weighting the dividend,” Ord Minnett said.

RBC also noted no change to capex guidance, saying that should also be seen positively considering the potential for cost inflation at major projects, especially in Western Australia where its cash-cow iron ore operations are situated.

New chief executive Jakob Stausholm has a big job on his hands repairing the miner’s reputation. Picture: Sharon Smith / NCA NewsWire

Rio Tinto’s statement swiftly moved from the impressive numbers to its ESG (economic, social and governance) agenda, saying it kept up efforts to earn back trust after the Juukan Gorge cave blast debacle.

“We continue rebuilding our relationships with traditional owners in the Pilbara and engaged extensively with government representatives, business leaders, current and former Rio Tinto employees and our shareholders,” the miner said.

“The insights from these meetings are helping us improve how we operate and effectively and respectfully engage in a collaborative manner wherever we operate.”

Rio Tinto also touched on the assassination of Nico Swart, the general manager of its Richards Bay Minerals operations in South Africa, in May.

Mr Swart was gunned down on a busy road while driving to work, with the Zululand Observer reporting more than 20 high-calibre bullets were sprayed into his vehicle.

The operations have been forced into suspension due to ongoing public violence in South Africa.

Rio Tinto has a big portfolio of projects around the world, including its Diavik diamond mine south of the Arctic Circle.

Rio Tinto also on Wednesday announced it would spend $US2.4bn ($A3.26bn) on the big Jadar greenfield lithium-borates project in Serbia to scale up its exposure to battery materials.

Morgan Stanley said Serbia was a relatively new jurisdiction for Rio Tinto to operate an asset the size of Jadar, but it viewed the regulatory risk in the country as “somewhat low”.

The next steps are seeking an exploitation licence and regulatory approvals, with a construction start target of 2022.

Morgan Stanley also noted The Financial Times had reported the UK Financial Conduct Authority was conducting a probe into the timing of disclosures on the value of Rio Tinto’s massive Oyu Tolgoi project in Mongolia in 2018 and 2019, notably around a $US1.2-1.9bn ($A1.6-2.5bn) capital expenditure overrun and consequent delays.

“If confirmed, such news would add to challenges faced by the company’s new management team,” it said.