Rio Tinto Bounces Back with $4.62 Billion in Profit in 2016

Samuel SharpFeb 09, 2017

The world's second biggest miner posted a net profit of US$4.6 billion for full-year 2016 compared with a loss of US$866 million a year earlier.

The world's second-biggest miner was the biggest gainer on the FTSE 100 index, adding 2.65% after revealing that its underlying earnings rose by 12% past year to $5.1bn (£4.1bn).

The price of iron ore surged 81 percent past year and now sells for around $80 a tonne, despite analysts' expectations for a retreat to around $55.

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 USA fuel inventories and a slump in Chinese demand.

Receive Rio Tinto PLC News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for Rio Tinto PLC with's FREE daily email newsletter. It has generated strong operating cash flow of $8.5 billion and underlying earnings of $5.1 billion.

The company is in a "strong position to deliver superior shareholder returns", he added.

The company generated operating cash flow of U.S. $8.5 billion and cut cash costs by US$1.6 billion.

The company's three key growth projects are the $338 million Silvergrass iron ore mine, the $5.3 billion Oyu Tolgoi underground expansion, and the $1.9 billion Amrun bauxite project.

Rolls-Royce rose 2.6 percent to 718 pence, making it the top gainer in the FTSE 100, after JP Morgan raised its target price to 740 pence from 730 pence and increased its 2016 earnings per share forecast by 11 percent.

Rio Tinto has ridden the commodities wave over the previous year, with its share price nearly doubling.

EBITDA margin of 38 percent in 2016 increased from 34 percent in 2015, reflecting the positive impact of the cash cost improvements.

Still, there are worries over whether the turnaround in commodity prices will be sustainable.

A small share buyback took returns to investors to $3 billion. That demand was fueled by not only domestic production cutbacks but also a rebound in construction activity following a lift in fiscal stimulus from the Chinese government. It also provides management with flexibility to invest in new projects even if the recovery in commodity prices loses steam, the company said. Oil producer, BP's earnings rose less than expected in the fourth quarter, as it sought to adapt to low energy prices with cost cuts, asset sales and a pullback in investment plans. The sale would leave Rio with just two remaining coal mines once completed.

"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", Soirat said.

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