Rio Tinto first half earnings jump 260 percent

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Anglo-Australian mining giant Rio Tinto Thursday posted a 260 percent jump in first-half net earnings to a record 5.85 billion US dollars, citing recovery in its key markets.

However, despite forecasts of strong global growth this year and next, the company warned that the world economy "will be volatile" for the next year and a half.

Chief executive Tom Albanese said in a statement: "We've reaped the benefits of the cost reduction efforts implemented in 2009 and we have been pushing our production hard to benefit from a strong pricing environment, leading to record first-half cash flows."

Chairman Jan du Plessis said: "Developing our relationship with China is a key priority for Rio Tinto."

He said the "outstanding" first-half performance was due to higher commodity prices, which added 3.77 billion to underlying earnings compared with the same period last year.

The results were underpinned by a 125 percent boost to underlying earnings of 5.77 billion dollars.

Du Plessis also attributed the results to cost reduction efforts, which slashed Rio Tinto's net debt to 12 billion dollars from 39 billion in June 2009.

Rio said it had renewed its focus on growth, with three billion US dollars approved since January for projects including the expansion of Western Australia iron ore operations and a joint venture with China's Chinalco at the Simandou iron project in Guinea.

"Growth is the first priority for our cash flows," said Albanese, noting expansions or development underway in Canada, the United States and Mongolia.

Chinese growth is tipped to be nine percent, with "positive implications for metals and minerals markets", but Albanese warned that "economic conditions on a global scale will be volatile" for the next 18 months.

"Our longer-term view remains that industrialisation and urbanisation, followed by India, will drive robust commodity demand growth," Albanese said.

Iron ore accounted for the lion's share of Rio's first-half earnings, with production growing 15 percent. However, revenues saw a 74 percent spike because of sharply higher prices.

The iron ore division posted earnings of 4.11 billion, compared with 1.93 billion a year earlier, with the price hike mainly due to a shift in March away from annual benchmark contracts to quarterly pricing, Rio said.

Profit for the first half was 6.28 billion dollars, compared with 1.83 billion dollars for the same period last year, and Rio offered an interim dividend of 45 US cents.

© 2010 AFP

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