Rio Tinto Boasts Record Earnings in First-Half 2010

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Researched by Industrial Info Resources (Sugar Land, Texas)--International mining giant Rio Tinto plc (NYSE:RTP) (London, England) reported very strong overall gains for the first half of 2010, which ended June 30, as higher prices and a recovery in key markets boosted earnings, while improved operational performance and cost-reduction efforts dramatically reduced the company's expenses. Net earnings for the half totaled $5.85 billion, which is a record for the company, compared to only $1.62 billion in first-half 2009.

Company officials stressed that the reported net earnings include net impairment charges of $464 million and $534 million in the first halves of 2010 and 2009, respectively, as well as a $544 million gain on derivatives in first-half 2010 and more than $400 million in fees, restructuring costs and other losses in first-half 2009. When excluding these items, "underlying earnings" are $5.77 billion for first-half 2010, compared to $2.57 billion in the same period last year.

Total gross sales revenue for Rio Tinto stood at $26.77 billion, a 37.11% increase from first-half 2009. Tom Albanese, the chief executive of Rio Tinto, cited stronger prices in nearly all of Rio Tinto's major commodities as a primary reason for the first-half gains: average copper and molybdenum prices were both up 78% from the same period last year; average aluminum prices were up 50%; and gold prices were up 26%. Albanese also cited cost-reduction efforts that began in 2009, which led to a relatively low capital expenditure of $1.8 billion for the first half, as well as a reduction of net debt from $18.9 billion at the end of 2009 to $12 billion on June 30. These gains were offset partly by higher energy costs, which reduced earnings by $138 million.

"I am in no doubt that with a strong balance sheet, a first-class portfolio of assets, and a settled, confident organization, we are well-placed to grow our business in a world that will, in all likelihood, continue to be a volatile one," said Jan du Plessis, the chairman of Rio Tinto, in a company Webcast.

Gross sales revenue improved in all of Rio Tinto's major segments except Energy, and net earnings improved in all segments except Energy and Diamonds & Minerals:

• Iron ore revenues were reported to be $9.9 billion, a 73.85% increase from first-half 2009, while net earnings stood at $4.11 billion, compared to $1.93 billion in the same period last year. Production was reported to be 87 million tons, a 14.78 % increase.
• Aluminum revenues were reported to be $7.38 billion, a 41.13% increase from the same period last year, while net earnings stood at $358 million, compared to a loss of $689 million in first-half 2009:
• Bauxite production was reported to be 16.19 million tons, a 14.67% increase from the same period last year.
• Alumina production was reported to be 4.45 million tons, a 2.91% increase.
• Aluminum production was reported to be 1.89 million tons, unchanged from the same period last year.
• Copper revenues were reported to be $3.44 billion, a 51.12% increase from the same period last year, while net earnings stood at $1.06 billion, compared to $529 million in first-half 2009:
• Mined copper production was reported to be 333,200 tons, a 17.57% decrease from the same period last year.
• Refined copper production was reported to be 186,500 tons, a 9.6% decrease.
• Mined molybdenum production was reported to be 6,000 tons, a 33.33% increase.
• Mined gold production was reported to be 394,200 ounces, a 14.16% decrease.
• Refined gold production was reported to be 320,000 ounces, a 45.45% increase.
• Energy revenues were reported to be $2.74 billion, a 16.48% decrease from first-half 2009, while net earnings stood at $642 million, a 14.85% decrease:
• Uranium production was reported to be 5.33 million pounds, a 23.95% decrease from the same period last year.
• Hard coking coal production was reported to be 4.3 million tons, a 30.3% increase.
• Other Australian coal production was reported to be 10.4 million tons, a 6.31% decrease.
• U.S. coal production was reported to be 21.2 million tons, a 50.23% decrease.
• Diamonds & Minerals revenues were reported to be $1.47 billion, a 33.09% increase from the same period last year, while net earnings stood at $121 million, an 84.51% decrease:
• Diamond production was reported to be 7.11 million carats, a 4.72% increase from first-half 2009.
• Titanium dioxide production was reported to be 684,000 tons, a 4.27% increase.
• Borates production was reported to be 247,000 tons, a 30% increase.
• Talc production was reported to be 504,000 tons, a 18.31% increase.
• Revenues from other operations totaled $2.41 billion, a 3.57% increase from the same period last year, while earnings totaled a loss of $2 million, compared to a $120 million loss in first-half 2009.

Albanese said that commodity demand will continue to grow, driven by industrialization and urbanization in China and India, which will benefit metals and minerals markets. Capital expenditures for full-year 2010 are expected to be about $6 billion, compared to $5.36 billion for full-year 2009. The expected rebound in spending is being attributed to $3 billion in project development, including $1 billion toward the expansion of the company's Pilbara operations in Western Australia. For more information, view May 19, 2010, article - Rio Tinto Expanding Australian Port Export Capacity.

"2010 is shaping up well for Rio Tinto," Albanese said in the Webcast. "We are driving our operations at close to capacity. Most of our markets are strong, and our overall demand outlook is positive."

Industrial Info is tracking 42 active Rio Tinto projects that are worth a total of more than $31 billion, including the $5 billion construction of a 600,000-ton-per-year copper mine and concentrator in Superior, Arizona. The project, which involves building a 7,000-foot-deep underground block-caving method mine and concentrator, is expected to kick off in March 2014 and to be completed in May 2019. For more information, visit Industrial Info's International Metals and Minerals Database.

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