Rio Tinto trims dividend as Pilbara iron ore output and lithium investment weighs on bottom line
Rio generated $US26.9 billion ($41.3b) of sales revenue during the first six months of 2025, a flat result compared to the same period a year prior.
The average price Rio fetched for its most important commodity — iron ore — fell by 13 per cent year-on-year and production also went backwards after a series of cyclones in January and February savaged its key Pilbara port facilities.
This was partially offset by Rio's 'improving operational performance' and a 'rising contribution' from its aluminium and copper divisions.
Approximately $US6.9b of net cash was generated across Rio's global operations, down 2 per cent on the first-half 2024 result.
Net debt ballooned by more than 160 per cent from $US5.5b to $US15b after Rio took on fresh loans to fund its $US6.7b purchase of Arcadium Lithium, which was completed in March.
Rio progressed other lithium projects in South America and Europe during the first half.
Group net profit was 22 per cent lower at $US4.5b and this cascaded through to a 16 per cent cut in the interim dividend to $US1.48.
More to come . . .
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West Australian
3 days ago
- West Australian
The world's biggest iron ore windfall is fading for Australia, with no clear successor
Flying deep into the heart of Western Australia, Rio Tinto Group executives, politicians and media step off a chartered jet into a Pilbara airport, little more than a sunbaked shed with metal detectors. Cameras roll. Smiles flash. They are here for the unveiling of Rio's Western Range, a new open-cut mine designed to pump out 25 million tonnes of iron ore a year. But behind the fanfare, a harsher truth looms: Western Range isn't about growth. It's about keeping the machine running. In the Pilbara — home to the world's largest iron ore output — Rio Tinto is swapping out old deposits for new just to maintain current production. The powerhouse sector that helped Australia sidestep the 2008 global financial crisis, churned out billionaires, and fed China's skyline ambitions is no longer booming - it's plateauing. Less than two months after the ribbon was cut at Western Range, a more muted signal followed. On Wednesday, Rio Tinto reported its lowest first-half profits in five years after iron ore prices slumped. The result wasn't a collapse, but a reminder that the cracks are widening - and the boom years are getting harder to hang onto. The steelmaking material that underpinned Australia's economic rise is losing its edge: ore quality is falling, margins are tightening, and the vast deposits that built decades of prosperity are slowly being exhausted. None of this will be swift, but the once-reliable resource may not be able to pull Australia through the next financial calamity. And there's not much of a fallback plan. The Pilbara — bigger than California — has fuelled the global iron ore trade since the first shipment set sail for Japan nearly six decades ago. Warnings of an impending slowdown have surfaced before, only for the industry to prove its resilience time and again. But this time, the headwinds are stronger and mining giants are pouring billions into what comes next, as the foundations of the industry begin to shift. 'It's a very significant risk that sits across the Pilbara,' said Greg Lilleyman, a veteran mining executive who served as Fortescue's chief operating officer and spent 26 years at Rio Tinto. 'Customers want higher quality iron ore, lower emissions per tonne of steel, higher productivity from smaller footprints' The lack of any clear successor to iron ore's economic heft is leaving a hole that Australia is unsure how to fill. As the Pilbara's dominance starts to wane, broader pressures are mounting: the re-elected Labor government is rallying top business leaders to tackle stagnant productivity with a budget stuck in deficit. The so-called Lucky Country is being forced to confront the original irony of its nickname: a nation long-cushioned by resource windfalls, now facing the cost of prolonged complacency. As China's hunger for Australian iron ore peaks, Canberra forecasts prices dropping to $US74 a tonne by 2027, around 40 per cent below the average price over the past five years. That spells trouble for the federal budget, with revenue from the sector expected to drop by more than $19 billion in the next two years alone. Furthermore, production volumes are expected to peak within three years. It's a sharp reversal for a sector that Westpac estimates drove more than half of the nation's living standards gains in the first two decades of the century. Without major productivity reform, the bank warns the end of the 'mining dividend' could cost each Australian $75,000 in lost income over the next decade, senior economist Pat Bustamante said in a July report. Not everyone is publicly acknowledging the scale of the challenge. 'Iron ore is the bedrock of Australians' prosperity and the thread which binds us to the global economy,' Madeleine King, Australia's minister for resources, told reporters at the Western Range mine opening in June. The 'project is further proof that Australia's iron ore sector is the best and most stable in the world.' Iron ore still makes up more than 4 per cent of Australia's economy and has long been the backbone of state and federal budgets. But keeping up production and funding exploration is getting harder and more expensive as ore quality declines. At the same time, steelmakers are under pressure to cut emissions, accelerating a pivot toward higher-grade ores that produce less carbon - much of it now coming from new mining hubs outside Australia. In West Africa, Guinea's long-delayed Simandou project, backed by Rio Tinto and Chinese state-linked investors, is finally nearing production, with its first shipment expected by year's end. Home to some of the world's highest-grade untapped iron ore reserves, Simandou spans over 100 kilometres and is projected to produce more than 100 million tons annually at full tilt. Australian media has dubbed Simandou the 'Pilbara killer' - an overstatement, but one that underscores the stakes. Its development reflects Beijing's long-term ambition: to break its dependence on Australian ore and gain greater control over a key input to its steel industry. Chinese state-owned companies are increasingly partnering with global miners, including China Baowu Steel Group Corp., which owns 46 per cent of Western Range. 'We are not just unveiling a new operation, we are celebrating the next chapter' in the Baowu partnership, Jakob Stausholm, outgoing CEO of Rio Tinto, said at the mine's opening, speaking just meters from a building-sized driverless truck dumping piles of ore into a crusher. The speeches were intended to emphasize strength and continuity: ore from the new pit was being piled onto an 18-kilometer conveyor belt that would roll all the way to Rio Tinto's existing Paraburdoo plant. But the plant has now been processing material for half a century - as China diversifies supply and demands cleaner ore, the Pilbara is starting to show its age. For much of this century, iron ore fines with 62 per cent metal from the Pilbara have set the global standard - it's the grade that's priced, traded, and shipped around the world. But that benchmark is now under pressure. As the quality of the material slips into decline, pricing agency Platts is planning to drop the benchmark to 61 per cent from next year - a small shift that signals a bigger challenge to Australia's dominance. High-grade ore is crucial as the world shifts from coal-heavy blast furnaces to cleaner electric-arc technology to cut emissions. Australia wants to lead the green steel race - Prime Minister Anthony Albanese underscored iron ore's role in decarbonization during his visit to Shanghai last month - but most Pilbara deposits fall short of the 67 per cent purity typically required, stuck between 56-62 per cent. Closing that gap will demand investing billions in renewables, hydrogen, and processing - no small task amid weak productivity and tight finances. 'What got us to this point won't get us where we need to go,' Tim Day, head of Western Australia iron ore operations at BHP, said at a June industry event in the Pilbara. 'We are playing in a global game, where the rules are changing radically as we speak.' Australia's mining giants, including global leader BHP, still boast some of the lowest production costs in the world, with hefty margins. But the fundamentals are shifting. Future output may rise in volume, but not in value. It's an even bigger concern given that this revenue stream is expected to bankroll the transition to clean energy, the only long-term strategic bet the mining majors are currently making. With rich deposits of lithium and rare earths, Pilbara miners that built their fortunes on red dirt iron are now redeploying capital into projects aimed at powering the energy transition and meeting soaring demand from data centers and tech industries. But earnings from these ventures remain a fraction of iron ore profits, and the investment risks remain significant. After more than a decade on the sidelines, Rio Tinto is back in dealmaking mode, betting big on the future of battery metals. Its $US6.7 billion acquisition of Arcadium Lithium last year positioned the miner for a bigger role in the global lithium supply chain. The timing, however, isn't ideal - prices remain mired in a downturn, and Rio is currently revising the cost of its Jadar lithium project in Serbia. BHP has also turned to strategic dealmaking to reshape its future. The world's biggest miner launched a bold $US49 billion takeover bid for Anglo American last year, driven largely by a desire to secure more copper, a metal critical to the global electrification push. While the bid ultimately failed, it signalled BHP's intent to pivot more aggressively toward alternative growth-drivers. Despite the growing momentum behind battery metals, China remains firmly in control of the supply chain and is likely to for years to come. Lithium, copper, rare earths and other key inputs to the energy transition currently generate only a fraction of the revenue that iron ore has delivered for decades. Annual iron ore exports were estimated at $116 billion in latest government data, compared with $13 billion for copper shipments and $4.6 billion for lithium. 'Critical minerals are important to Australia's economy, diversified commodity portfolio and Net Zero plan ambitions, but are not a viable alternative for iron ore,' said Caroline Tiddy, a geologist and associate professor at the University of South Australia. Fortescue founder and billionaire Andrew Forrest is one of the industry's loudest advocates for green technology, and has warned the Pilbara risks becoming a 'wasteland' if Australia fails to adapt to shifting global demand. Rio Tinto's incoming CEO Simon Trott, currently head of its iron ore division, remains more sanguine, arguing the region will anchor the economy for generations. The truth likely lies somewhere in between. Meanwhile, external threats to the Pilbara keep mounting. Beyond the challenge of replacing iron ore and coping with declining grades, US President Donald Trump's tariffs are already threatening broader global demand. Rivals like Brazil's Vale are ramping up output and supplying higher-grade ore, intensifying competitive pressure. Simon Trott has his work cut out. As he prepares to take the helm of the world's top iron ore exporter on August 25, he struck a confident tone just days before opening the new Western Range mine. 'Iron ore in the Pilbara will be continuing long after I'm gone - and long after my children's children have gone,' Mr Trott said in an interview. 'The Pilbara will last for many decades to come.' Bloomberg.
The Australian
3 days ago
- The Australian
ASX miners slump on Thursday but market's rally extends into July
Weaker than expected earnings from Rio Tinto, troubles travelling to the US and tariffs starting to impact listed businesses, all dragged on the ASX during Thursday's trading. On a mixed day on the market, the benchmark ASX 200 on Thursday fell 13.60 points or 0.16 per cent to close the month of July at 8,742.80. The broader All Ordinaries also slipped down 16.40 points or 0.18 per cent to 8,999.00. Australia's dollar traded 0.26 per cent higher to 64.63 US cents. While the overall market dropped, eight of the 11 sectors traded higher, with gains out of the information technology and consumer discretionary sectors offset by the major miners slumping. The falls followed Rio Tinto announcing its earnings update after trading on Wednesday, informing the market that first half profits came in at their lowest point since 2020, on the back of falling iron ore prices. BHP fell 2.41 per cent to $39.25, Rio Tinto slumped 3.55 per cent to $111.70 and Fortescue slipped 2.31 per cent to $17.77. IG market analyst Tony Sycamore said even with Thursday's wobbles, July's reputation of being a good month for Australian investors continued in 2025. 'As it enters the home straight, it is poised for a 2.35 per cent gain for the month and on track for a fourth straight month of gains made more memorable by its 1580 points (22 per cent) rally from its early April 7169.2 low,' he wrote in an investment note. Consumer discretionary shares jumped after 11.30am after a surprising bounce in retail sales. Shares in JB Hi-Fi were up 1.30 per cent to 411.70, Harvey Norman gained 1.05 per cent to $5.80 and Lovisa Holdings jumped 2.15 per cent to $34.14 on the retail figures. According to the ABS retail sales gained 1.2 per cent for the month of June, its biggest lift since the end of the Covid lockdowns. AMP economist My Bui said June's retail strength, which came off the back of end of financial year sales and the release of the Nintendo Switch 2, might not be a sign of a strong economy. 'In addition, the strong June result has benefited from one-off releases and promotions, which is not necessarily a sign of strength,' she said. Overall though, Australia's market was unable to follow a jump on Wall Street, with the S & P 500 futures up more than 1 per cent on the back of major tech companies beating expectations. Microsoft futures are up 8 per cent and Meta surged 11 per cent as the two tech giants smashed quarterly earnings forecasts. In company news, shares in Flight Centre slumped 7.3 per cent to $11.94 after the business missed its guidance. The travel group said a combination of Middle East tensions, additional costs out of Asia and difficult travel conditions in the US added to the unexpected result. Champion Iron slumped 13.12 per cent to $4.17 after brokers downgraded the miner following a weaker-than expected trading update on Wednesday. Luxury retailer Cettire shares plunged 23.5 per cent to $0.26 after the business said it was accessing the impacts of US President Donald Trump's tariffs on the business. Shipments to the United States represent approximately 40 per cent of Cettire's gross revenue. Read related topics: ASXRio Tinto Business Breaking News End-of-financial-year sales and Australians flocking to one electrical item have triggered an unexpected retail boom. Business Breaking News A key Reserve Bank official has hinted at an August rate cut after welcoming new inflation figures showing the lowest rate since 2021.
Perth Now
3 days ago
- Perth Now
Miners, Flight Centre drag ASX 200 lower
Weaker than expected earnings from Rio Tinto, troubles travelling to the US and tariffs starting to impact listed businesses, all dragged on the ASX during Thursday's trading. On a mixed day on the market, the benchmark ASX 200 on Thursday fell 13.60 points or 0.16 per cent to close the month of July at 8,742.80. The broader All Ordinaries also slipped down 16.40 points or 0.18 per cent to 8,999.00. Australia's dollar traded 0.26 per cent higher to 64.63 US cents. While the overall market dropped, eight of the 11 sectors traded higher, with gains out of the information technology and consumer discretionary sectors offset by the major miners slumping. Technology and consumer discretionary stocks led the gains. NewsWire / Jeremy Piper Credit: News Corp Australia The falls followed Rio Tinto announcing its earnings update after trading on Wednesday, informing the market that first half profits came in at their lowest point since 2020, on the back of falling iron ore prices. BHP fell 2.41 per cent to $39.25, Rio Tinto slumped 3.55 per cent to $111.70 and Fortescue slipped 2.31 per cent to $17.77. IG market analyst Tony Sycamore said even with Thursday's wobbles, July's reputation of being a good month for Australian investors continued in 2025. 'As it enters the home straight, it is poised for a 2.35 per cent gain for the month and on track for a fourth straight month of gains made more memorable by its 1580 points (22 per cent) rally from its early April 7169.2 low,' he wrote in an investment note. Consumer discretionary shares jumped after 11.30am after a surprising bounce in retail sales. Shares in JB Hi-Fi were up 1.30 per cent to 411.70, Harvey Norman gained 1.05 per cent to $5.80 and Lovisa Holdings jumped 2.15 per cent to $34.14 on the retail figures. According to the ABS retail sales gained 1.2 per cent for the month of June, its biggest lift since the end of the Covid lockdowns. AMP economist My Bui said June's retail strength, which came off the back of end of financial year sales and the release of the Nintendo Switch 2, might not be a sign of a strong economy. Despite the falls, eight of the 11 sectors gained on Thursday. NewsWire / Max Mason-Hubers Credit: News Corp Australia 'In addition, the strong June result has benefited from one-off releases and promotions, which is not necessarily a sign of strength,' she said. Overall though, Australia's market was unable to follow a jump on Wall Street, with the S & P 500 futures up more than 1 per cent on the back of major tech companies beating expectations. Microsoft futures are up 8 per cent and Meta surged 11 per cent as the two tech giants smashed quarterly earnings forecasts. In company news, shares in Flight Centre slumped 7.3 per cent to $11.94 after the business missed its guidance. The travel group said a combination of Middle East tensions, additional costs out of Asia and difficult travel conditions in the US added to the unexpected result. Champion Iron slumped 13.12 per cent to $4.17 after brokers downgraded the miner following a weaker-than expected trading update on Wednesday. Luxury retailer Cettire shares plunged 23.5 per cent to $0.26 after the business said it was accessing the impacts of US President Donald Trump's tariffs on the business. Shipments to the United States represent approximately 40 per cent of Cettire's gross revenue.
