Rio bucks the trend

Vancouver — With most major mining houses recording mixed financial results at best, the world’s biggest miner posted record first-half earnings in 2001.

Rio Tinto (RTP-N) saw net profits soar US$164 million to US$841 million, or 61.2 per share, in the first half of the year. This was a 24% jump from the US$677 million, or 49.4 per share, tallied in the first half of 2000.

“Rio Tinto’s first-half earnings were at a record level, which is satisfactory against the background of a weak economic environment”, says Sir Robert Wilson, the company’s chairman.

Increased volumes contributed US$97 million to the bottom line. Driving the surge were additional operating earnings from last year’s acquisitions, including:

• the North takeover;
• the additional 27.6% of Comalco;
• the additional 40% of the Argyle diamond mine; and
• the acquisition of Peabody’s Australian mines in January 2001.

In total, new acquisitions contributed US$35 million to first-half earnings.

Lower metal prices reduced earnings by US$33 million. During the first half of 2001, there was a 30% decline in nickel prices, a significant reduction in alumina prices and more moderate reductions in the prices of copper and gold. This drop was offset by higher coal and iron ore prices.

“The slowdown in the U.S. has been accompanied by relatively soft markets in Europe and Japan,” says Wilson. “A further decline in the Australian dollar against the U.S. dollar has substantially helped ease the burden of weak prices.”

Rio Tinto remains cautious on the global economy for the rest of the year and into 2002.

“We see little to encourage optimism about metals demand in the U.S. during the rest of this year and, probably, the first half of 2002,” says Wilson. “The economic outlook is still deteriorating and we have to expect a testing time ahead.”