Rio Tinto to pay largest dividend in its 148-year history: Investors set for a record £6.5bn windfall amid global mining boom
RioTinto will hand investors the largest dividend in its 148-year history as it cashes in on a mining bonanza.
The company will pay out £6.5billion, equal to 400p per share, after a surge in the price of steelmaking ingredient iron ore boosted profits by more than a third.
Iron ore rose in value by almost 85 per cent last year, climbing above $175 a tonne, as demand rocketed from China’s steel industry. The country has been stockpiling the commodity as it plans to unleash a post-Covid economic boom.
Mining boom: Rio Tinto will pay out £6.5bn, equal to 400p per share, after a surge in the price of steelmaking ingredient iron ore boosted profits by more than a third
Rio’s bumper payout came a day after fellow FTSE 100 miners BHP and Glencore promised to hand investors huge sums – £3.7billion and £1.2billion respectively – after they too benefited from rising commodity prices.
The results have added to growing speculation that the market is entering another ‘supercycle’ that will see the prices of commodities soar.
A construction boom in China, economic stimulus in the US, the green revolution and lower stocks of commodities are all forecast to bolster prices for years to come.
Rio’s 2020 profits rose by almost 40 per cent to £11.1billion. Its strong financial performance comes as it tries to rebuild its reputation after a blunder last May, when it blew up two 46,000-year-old Aboriginal caves in Australia to expand a lucrative mines.
The blasts at the Juukan Gorge were legal and had been planned for years but triggered international outcry, an Australian parliamentary inquiry and a review of heritage laws.
Within months its chief executive Jean-Sebastien Jacques and two other bosses were forced to resign.
Jacques was replaced in December by former finance boss Jakob Stausholm, who described 2020 as a ‘year of extremes’.
Stausholm said the blasts had been a ‘dark day for Rio’ and that he recently visited the gorge and met the local Puutu Kunti Kurrama and Pinikura people, whose sites were destroyed.
Rio’s payout came a day after fellow FTSE 100 miners BHP and Glencore promised to hand investors huge sums – £3.7bn and £1.2bn respectively
Stausholm said: ‘It has been an extraordinary year – our successful response to the pandemic and strong safety performance were overshadowed by the tragic events at the Juukan Gorge, which should never have happened.’
He added that the financial performance made bolstering the payout an obvious move, adding: ‘We earned a lot of money last year.
‘We are down to now less than $1billion of net debt. So it’s difficult to argue that we should hold back on dividends.’
Of the 400p investors will receive, about 67p is a special payout. It is the most lucrative in Rio’s history since it was formed in 1873 when investors purchased land on the Rio Tinto – or ‘red river’ – in southern Spain.
The site was mined by the Greeks and Romans and it became the world’s top copper producer.
RBC Capital Markets analyst Tyler Broda said: ‘[This is] another example of strong payouts on offer in the sector and the likely ability, and intent for this to continue, especially as iron ore prices stay elevated, should help to underpin share prices.’
Rio has set new emissions targets as it aims to reach net zero emissions from shipping products by 2050 and invest in lower carbon technologies. Its shares fell 0.4 per cent, or 25p, to 6235p.