Rio Tinto Half-Year Profit Soars On Metal Prices, Cost Cuts

Autonomous haul trucks move along a haul road at Rio Tinto Group's Gudai-Darri iron ore mine in the Pilbara region of Western Australia, on Thursday, Oct. 19, 2023. Rio Tinto Group, BHP Group Ltd. and Fortescue Metals Group Ltd. produce almost two-thirds of the world's seaborne iron ore from Western Australia, and margins remain enviable. For the first time in a generation, though, the specter of disruption looms over mining's most reliable profit generator. Photo by Bloomberg /Photographer: Bloomberg/Bloomber

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(Bloomberg) — Rio Tinto Group will pay its highest interim dividend in four years as first-half profit soared on strong commodity prices and a restructuring drive that boosted earnings.

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The world’s second-biggest miner posted a 43% increase in underlying profit to $6.85 billion, lifting its interim dividend to $2.11 per share, the highest since 2022. The company’s Sydney-listed shares rose more than 5% in early trading.

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The higher earnings were driven by a $3.6 billion benefit from stronger commodity prices, the company said in filings. Prices for copper, a key growth business for the company, have climbed about 10% this year, driven by supply disruptions and demand boost from data centers.

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Over the reporting period Rio found $870 million in cost savings through productivity efforts. It plans to find further savings, bringing the total to $1.8 billion by year-end. 

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“There is substantially more to come,” Chief Executive Officer Simon Trott said of the savings, adding the company was in a “relentless pursuit” of operational efficiencies. “You’re really seeing productivity become a structural driver of improvement in these numbers,” he added. 

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Trott has prioritized slimming down Rio and making it a more simplified business since he was appointed in August last year. 

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Part of the strategy involves selling non-core assets to raise $5 billion in 2026, including the company’s titanium and borates divisions. While little detail was provided on the timeline for the disposals, management was “comfortable” with how they were progressing, Trott said. 

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The results also came as strong commodity prices outweighed the impact of China’s economic slowdown, US tariff campaigns and conflict in the Middle East.

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Prices of iron ore — Rio’s biggest earner —- remained steady over the six-month period, despite plateauing demand from dominant buyer China. The company is yet to complete negotiations with state-backed buyer China Mineral Resources Group Co. over forward supply agreements. 

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“The iron ore market continues to evolve,” Trott said. The company is also working with other iron ore producers to “liberate value” in the Pilbara region of Western Australia “in ways that we probably haven’t done before.” 

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Rio continues to push its core growth strategy in copper, the metal key for the energy transition, with a ramp-up at its Oyu Tolgoi mine in Mongolia, its only meaningful near-term copper growth project. Over the longer term, it hopes to develop the Resolution mine in Arizona, which is still years from production. The company explored buying Glencore Plc. as a transformational acquisition to bolster its copper exposure before abandoning the talks in February over valuation differences.

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