Rio Tinto roars to doubled profits

By Rob Davies for the Daily Mail
Updated: 04:55 EDT, 6 August 2010

Soaring demand from China helped global mining powerhouse Rio Tinto to more than double first-half profits.

Wheels of fortune: Strong demand from China is driving Rio's profits

The miner (up 18p to 3430p) beat market expectations to deliver pretax profits of £5.56bn in the first six months, compared with £2.24bn this time last year.

Rio's performance was largely driven by continued strong demand from China's booming economy, which helped swell revenues to £16.85bn from £12.3bn.

Chief executive Tom Albanese said the barnstorming growth in Asia's developing economies would remain the engine room of Rio's earnings.

'Our longer-term view remains that industrialisation and urbanisation in China, followed by India, will drive robust commodity demand growth,' he said.

He added that stabilisation in European economies had also helped boost the firm's revenues.

Rio has also reaped the benefit of rising prices for the metals it mines, which added £2.4bn to the firm's coffers this year.

Iron ore prices rose on the back of a new global pricing system, bringing in some £2.6bn in profit for Rio.

Copper prices jumped by some 78%, while gold rose by 26% and demand for rough diamonds increased as the world emerged from the depths of the recession.

Chairman Jan du Plessis hailed a reduction in net debt - down from £24.5bn to £7.5bn - which he said would enable Rio to withstand 'further shocks' to the global economy.

The firm expects to reward shareholders with a full-year dividend at least as high as last year's offering of around 56p per share, after doling out an interim payout of about 28p.

Rio's stellar profits echoed the performance of rivals Fresnillo and Anglo-American this week, but one miner has proved the exception to the rule.

Randgold Resources, which mines gold in West Africa, said second-quarter profits doubled, but when stripping out the positive impact of rising gold prices, earnings were largely flat at £16.5m.

The company (down 320p at 5,395p) also warned that annual output could undershoot its 447,000-ounce target by as much as 5%, due in part to persistent power cuts at its Loulo mine in Mali.

Chief executive Mark Bristow said the firm would benefit from rising gold prices, as investors continue to seek a safe haven in the face of volatile equity markets.