Rio Tinto back in the black after 12 percent profit boost

Mining giant Rio Tinto (LON:RIO) reported its first annual gain in profit since 2013 on Wednesday, with higher iron ore prices boosting figures.

The miner generated a strong operating cash flow of $8.5 billion in the full year to the 31st December and underlying earnings of $5.1 billion. Underlying profit was boosted 12 percent by higher iron ore prices, hitting $5.1 billion in 2016. This is compares to the $4.75 billion average estimated by analysts.

The figures constitute a $5.5 billion improvement on the $866 million loss recorded in 2015.

Rio Tinto chief executive J-S Jacques commented on the results:

“Today’s results show we have kept our commitment to maximise cash and productivity from our world-class assets, delivering $3.6 billion in shareholder returns while maintaining a robust balance sheet. At the same time, we strengthened the portfolio and advanced our high-value growth projects as we look to the future.

“We enter 2017 in good shape. Our team will deliver $5 billion of extra free cash flow over the next five years from our productivity programme. Our value over volume approach, coupled with a robust balance sheet and world-class assets, places us in a strong position to deliver superior shareholder returns through the cycle.”

Mining companies have faced a tough year, with commodity prices at rock bottom forcing all miners to sell assets and cut down on costs. Rio Tinto was aided by 81 percent surge in iron ore, their main profit driver, as Chinese stimulus supported local steel output and lead to a higher demand.

The figures were also boosted by $1.3 billion worth of asset sales in Rio’s coal and aluminium business.

The company did cut its full-year dividend by 20 percent to $1.70 ($2.23) per share, but the figure remained well ahead of analyst forecasts and above the minimum of $US1.10 previously ensured by the board.

Rio Tinto shares are currently up 1.21 percent at 3,477.50 (0958GMT).