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Rio Tinto rides commodities recovery to deliver 12% earnings climb

09 February 2017

Rio reported an annual net profit of US$4.62 billion for the year to December 31, compared with a $866 million net loss in the previous financial year when key metals prices plunged and Chinese demand slowed, London-based Rio said on Wednesday.

Underlying earnings for the world's second-biggest mining house rose by 12 percent to $5.1 billion, beating analysts' estimates for around $4.87 billion, according to an externally compiled consensus.

In addition, Rio Tinto delivered $3.6 billion in shareholder returns, with a full year dividend of $1.70 per share.

"We enter 2017 in good shape", he added.

The UK oil and gas index fell 1.3 percent, making it the biggest sectoral decliner, after oil prices extended Tuesday's falls following a massive increase in US fuel inventories and a slump in Chinese demand.

The earnings before interest, tax, depreciation and amortisation margin improved to 38% from 34% due to productivity improvements. The Company focuses on finding, mining, processing and marketing the Earth's mineral resources. Net debt was reduced to $9.6 billion. The company also announced today a $US500 million share buyback.

The $3.6 billion in returns represents 70% of underlying earnings. "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". Rio Tinto Group declared that it has chose to gift the Bunder diamond deposit in India to the state government of Madhya Pradesh, where the mine is located, after the producer stopped work on it a year ago.

"We believe in the value and quality of the Bunder project and support its future development, and the best way to achieve that is to hand over the assets to the government of Madhya Pradesh", Arnaud Soirat, chief executive officer for Rio Tinto Copper & Diamonds, said in the statement. The group will pay a full year dividend of $1.7 per share, down from 2015's $2.15 payout but firmly ahead of the higher end of market forecasts and will also buyback $500 million worth of shares. A range of technology driven initiatives targeting productivity improvements through improved reliability and utilization rates are expected to moderate growth in the company's operating costs. Capital expenditure will be USD5.00 billion, rising to USD5.50 billion annually in 2018 and 2019, it said.

Rio Tinto rides commodities recovery to deliver 12% earnings climb