Despite the torrential weather that threatened to damage the mining industry’s year completely, Rio Tinto’s commodities are looking better now than they did at the start of last year.
The miners reports for 2010 revealed a massive $US 14.3 billion net profit, a huge increase from the $US 9.5 billion the previous year and even more than the $US 3.7 billion made in 2008.
Some of the money will be spent on a $5 billion share buy back and a 20 per cent rise in dividends, and its debt of $4.3 billion can be easily overcome in a few months of free cash flow.
But the miner is still cautious about their short-term outlook for the global economy and yesterday chief executive Tom Albanese said commodity prices would fluctuate and that winding-down stimulus in developed countries could affect its growth.
“Despite conditions looking positive, with commodities prices to stay above average, we see even higher risks of such volatility in the near term due to persistent economic imbalances,” he said.
“These risks include the speed and timing of removal of government stimulus programs and inflationary pressures in developing economies, particularly in China.”
The release of the company’s 2010 results, showing the better than expected year, has made Rio Tinto optimistic about the coming year.
Much of the uncertainty for mining companies was cleared up last year, as the US moved out of recession and the possibility for commodities demand was heightened.
Of course, in its second wave of demand, China still remains the single biggest importer of iron ore, and its demand does not look like waning anytime soon.
The dealing with the sovereign risk issues by Europe and inflation and potential overheating in China helped ease Rio Tinto’s concerns.
“GDP growth we saw for 2010 was better than most people expected at the start of the year, particularly in the emerging economies,” Albanese said.
“The long-term picture remains positive and we maintain our view that in the next 15 to 20 years, we’ll see a doubling in demand in iron ore, copper, aluminium as emerging markets industrialise.”
Iron ore and copper make up almost 90 per cent of Rio Tinto’s 2010 result.
First production from the Queensland based Kestral coking coal mine, that has risen in cost by 10 per cent –from $US 990 million to $US 1 billion , is expected to begin in last 2012 or early 2013.
The huge profits for Rio come despite the $12 billion it’s spending on expanding iron ore operations and buying into new mines including the Oyu Tolgoi in Mongolia and Riversdale Mining.