Melbourne: Global miner Rio Tinto committed to step up spending on projects to boost growth, after reporting a record first-half profit on Thursday, driven by booming sales of iron ore to China.
Rio Tinto, the world’s second-biggest iron ore miner, said it would pump up capital spending by 50% in 2011 to $9 billion, and would spend more on its Oyu Tolgoi copper and gold project in Mongolia and possibly invest more in aluminium and alumina.
“We are firmly focused on high quality growth with many tier one options ahead. We look to the future with confidence,” chairman Jan du Plessis said in a statement.
After slashing debt from $39 billion down to $12 billion over the past 12 months, the company said it now had a strong balance sheet that could withstand any further shocks from the global economy.
“Growth is the first priority for our cash flows,” chief executive Tom Albanese said in a statement.
The company successfully worked with rivals BHP Billiton and Xstrata in July to get Australia’s Labor government to lighten a new tax on mines, which Rio had seen as its biggest sovereign risk.
The miners may still claim total victory over the mining tax, as it will be scrapped if the opposition Coalition wins Australia’s election on 21 August. In the latest polls, the Coalition is running neck-and-neck against Labor.
Beyond the tax’s fate, the key issue for Rio Tinto is whether it will win approval for its proposed $116 billion Australian iron ore joint venture with BHP Billiton, a deal coveted for the more than $10 billion in savings it is expected to generate.
Rio Tinto’s underlying earnings for January-June rose to $5.8 billion from $2.6 billion a year earlier, its strongest half-year profit rise in at least 10 years, beating analysts’ forecasts of $5.5 billion.
Rio’s earnings follow strong results from Brazil’s Vale, the world’s biggest iron ore miner, and Anglo American, recovering from a demand slump last year.
Earnings from Rio Tinto’s biggest business, iron ore, more than doubled to $4 billion, beating analysts’ expectations.
The aluminium business, which has lumbered the company since its badly-timed takeover of Alcan three years ago, was back in the black, with earnings of $313 million.
Rio Tinto reaffirmed it planned to pay out at least $1.75 billion in dividends this year, at least in line with 2008, and said it would spend at least $6 billion on projects this year, up from an earlier forecast of $5 billion.
Rio’s Australian-listed shares have fallen 2.5% so far this year versus a 6.2% decline for the benchmark S&P/ASX h200 Index.