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Rio Tinto earnings rocket

Rio Tinto
Chief Executive
Tom Albanese
Melbourne, Australia — MININGREVIEW.COM — 10 August 2010 – Anglo-Australian mining giant Rio Tinto has posted a 260% jump in first-half net earnings to a record US$5.85billion (R43.9 billion), and has expressed the opinion that China is the key to its future.

In a statement issued here, the company warned, however, that despite forecasts of strong global growth this year and next, the world economy would be volatile for the next year and a half.

Chief executive Tom Albanese said in a statement: “We’ve reaped the benefits of the cost reduction efforts implemented in 2009 and we have been pushing our production hard to benefit from a strong pricing environment, leading to record first-half cash flows.”

Iron ore accounted for the lion’s share of Rio’s first-half earnings, with production growing 15%. However, revenues saw a 74% spike because of sharply higher prices.

The iron ore division posted earnings of US$4.11billion (R31 billion), compared with US$1.93billion (R14.5 billion) a year earlier, with the price hike mainly due to a shift in March away from annual benchmark contracts to quarterly pricing, Rio said.

Chairperson Jan du Plessis said: “Developing our relationship with China is a key priority for Rio Tinto.”

And Albanese added: “Chinese GDP is expected to grow at approximately 9%. This would have positive implications for metals and minerals markets, but it is clear that global economic conditions on a global scale will be volatile.”

He also emphasised that Rio’s future lay with China, pointing to last week’s deal with Chinalco subsidiary Chalco to develop the huge Simandou iron ore project in Guinea. China has been the major buyer of Australia’s vast resources, which were key to helping Canberra avoid recession during the global downturn.

Rio said it had renewed its focus on growth, with US$3billion (R22.5 billion) approved since January for projects including the expansion of its Western Australia iron ore operations and the Simandou venture in Guinea.

Profit for the first half was US$6.28billion (R47 billion), compared with US$1.83billion (R13.7 billion for the same period last year.