Diversified mining group Rio Tinto has delivered on its targets in the first half of the 2014 financial year, CEO Sam Walsh reported on Thursday, as the company announced a 21% increase in its underlying earnings to $5.1-billion and said it had exceeded its operating cash cost reduction target early.
“We have delivered what we said we would, exceeding our $3-billion operating cash cost reduction target six months ahead of schedule, while producing record volumes and driving productivity improvements across all our businesses,” Walsh said.
Rio Tinto has achieved $3.2-billion of operating cash cost improvements since 2012 and is now targeting a further $1-billion in savings by the end of 2015.
Net earnings increased to $4.4-billion, from $1.7-billion in the first half of 2013.
The company reduced its first half capital expenditure (capex) to $3.6-billion and on Thursday further lowered its capex guidance for the full year to $9-billion – $2-billion below its previous guidance. Rio Tinto would spend about $8-billion a year from 2015.
Stronger operating cash flows of $8.7-billion, sharply reduced capital spend and proceeds from divestments have helped the mining giant to lower its debt by $6-billion, to $16.1-billion, from $22.1-billion a year earlier.
Rio Tinto has shipped record iron-ore volumes in the period under review and also set production records for iron-ore and thermal coal. Global iron-ore shipments, on a 100% basis, increased by 20% year-on-year to 142.4-million tonnes in the first half of the financial year. Global iron-ore production, on a 100% basis, increased by 10% to 139.5-million tonnes.
The copper division also delivered strong operational performance, which led to Rio Tinto increasing its full-year production guidance, driven by higher grades of concentrator recoveries at Kennecott Utah Copper, in the US, and the ramp-up at Oyu Tolgoi, in Mongolia.
Meanwhile, Rio Tinto reported that it had completed the review of the Kitimat modernisation project, in Canada. The total approved capital now stands at $4.8-billion.
In June, one potline (24 000 t of capacity) was closed at the Kitimat smelter as part of the transition to the commissioning of the modernised and expanded Kitimat facility, which is scheduled to produce first hot metal in the first half of 2015
The group’s net earnings of $4.4-billion in the first half reflect $0.8-billion of further impairments related to Kitimat, non-cash exchange rate gains of $0.6-billion and other excluded charges of $0.5-billion.
The diversified miner, which is listed in London and Australia, increased its interim dividend by 15% to 96c a share.
“We are confident Rio Tinto’s low cost, diversified portfolio will continue to generate strong and sustainable cash flows over the coming years. This solid foundation for growth will result in materially increased cash returns to shareholders, underscoring our commitment to deliver greater value,” Walsh commented.