By Rhiannon Hoyle
SYDNEY--Rio Tinto PLC unveiled a surprise special dividend after a sustained rally by iron-ore prices drove a 22% rise in annual net profit.
Rio Tinto, the world's second-biggest mining company by market value, on Wednesday reported a net profit of $9.77 billion for 2020. That compared to a profit of $8.01 billion in 2019.
The bottom line included $1.3 billion of exchange losses and $1.1 billion in impairment charges, mostly against three of its Pacific Aluminium smelters, its ISAL smelter in Iceland and its stake in the Diavik diamond mine in Canada's Northwest Territories.
Riding tailwinds from a surge in iron-ore prices, Rio Tinto reported a 20% lift in underlying earnings to $12.45 billion. That was above expectations of a $11.75 billion underlying profit, according to a compilation of 16 analyst forecasts published by Vuma.
Rio Tinto runs one of the world's biggest iron-ore export hubs and the commodity, used to make steel, accounts for the bulk of its earnings.
Directors declared a final dividend of $3.09 a share, taking the miner's full-year ordinary payout to $4.64 a share. Last year, Rio Tinto paid $4.43 a share, and analysts had been forecasting a total dividend of $4.80, according to the Vuma-compiled consensus.
Rio Tinto said it would also pay a special dividend worth $0.93 a share in what was the first financial result under new CEO and former chief financial officer Jakob Stausholm.
"During 2020, the agility and resilience of the business and our employees, coupled with strong commodity prices, enabled us to deliver underlying Ebitda of $23.9 billion and return on capital employed of 27%," said Mr. Stausholm.
The special dividend confounded expectations of many analysts who had predicted Rio Tinto would act cautiously on capital management as it battles to contain the fallout from the destruction of two ancient rock shelters in Australia's minerals-rich Pilbara region last year.
The disaster cost former Chief Executive Jean-Sébastien Jacques his job amid a global backlash from investors, communities and lawmakers who demanded executives be held accountable for the destruction of the caves at Juukan Gorge on May 24.
While Rio Tinto says it is committed to talks with the traditional indigenous owners of the land it mines, it has also been lifting iron-ore production and is benefiting from a surge in prices for the commodity, which in December struck a nine-year high.
The benchmark price for the commodity jumped as high as $176.90 a metric ton late in 2020 on strong Chinese demand, which was underpinned by China's quicker-than-anticipated economic recovery from the Covid-19 pandemic.
Rio Tinto in January said it produced 2% more iron ore in Australia last year versus 2019, with mines here--which account for most of its iron-ore production--largely unaffected by the coronavirus pandemic as Australia enjoyed relative success in keeping its spread under control.
Write to Rhiannon Hoyle at firstname.lastname@example.org
(END) Dow Jones Newswires
February 17, 2021 00:58 ET (05:58 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.