Rio Tinto’s (ASX:RIO) 2020 Annual Report Marked by Strong Performance

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Summary

  • Rio Tinto (ASX:RIO) has posted impressive annual results, on the back of supply disruptions and robust Chinese demand.
  • The company registered a significant increase in underlying earnings and free cash flow. Balance sheet remains exceptionally strong.
  • Robust market for iron ore concentrate and pellets is expected to continue into 2021.

World's second-largest miner Rio Tinto Limited (ASX:RIO) performed strongly in 2020, backed by high demand from major markets, especially China and supply disruptions. The company is expecting a strong year for iron ore in 2021 due to continued demand from steel producers.

(Source: RIO ASX Update, dated 22 February 2021)

Must Read: Rio Tinto (ASX:RIO) Introduces New Executive Team

Snapshot of RIO’s Annual Financial Performance

Rio generated USD15.9 billion in net cash from operational activities during 2020, backed by higher iron ore prices. Underlying earnings and EBITDA were higher by USD2.1 billion and USD2.7 billion year-on-year, to USD12.4 billion and USD23.9 billion, respectively.

The Board has recommended a final dividend of 309 US cents per share and a special dividend of 93 US cents per share. For the full year, total dividends stood at USD9 billion.

Total shareholder return for 2020 was 110.1% compared with 49.6% in FY19, mainly driven by commodity price movement and global macro environment changes.

Financial Highlights (Data Source: RIO ASX Update, dated 22 February 2021)

Operational Highlights

The Pilbara iron ore asset produced 333.4Mt in 2020, 2% higher from 2019, highlighting the improvements to mine and asset health. Total shipment for the year stood at 330.6Mt, which was 1% higher than 2019. The shipments were impacted by Cyclone Damien and COVID-induced challenges. Strong shipments to China in the second half bolstered the figures.

Must Read: Why Rio Tinto (ASX:RIO) shares traded at 12-year highs?

  • Rio’s bauxite production was 56.1Mt in 2020, up 2% year-on-year. However, 2020 shipments of 39.4Mt were down 1% from the same period a year ago.
  • Alumina production was 4% higher than in 2019, backed by Pacific refineries’ strong production.
  • Aluminium production stood at 3.2Mt, in line with 2019 production.
  • Total mined copper and refined copper production for the year was down by 9% and 40%, respectively. Mined copper production at Kennecott was lower by 25%, production from Escondida was down by 1% and Oyu Tolgoi production was up 2%.
  • Diamond production was also lower by 14% year-on-year.
  • Uranium production was 9% higher than in 2019.
  • Iron ore pellets', titanium dioxide and borates production were lower by 1%, 7% and 8%, respectively.

Strong Pipeline

Source: Copyright © 2020 Kalkine Media Pty Ltd.

Rio is advancing the USD2.6 billion Gudai-Darri iron ore mine with construction work underway. It has also invested USD1.55 billion in Robe Valley and West Angelas operations along with USD749 million towards Greater Tom Price.

The company is constructing the second tunnel at the Kemano project in Kitimat. It is developing innovative technology to eliminate all direct greenhouse gases from the smelting plant at Complexe Jonquière in Saguenay.

The USD0.9 billon Kennecott project remains on track, while Arizona’s Resolution Copper project has been completed with the next phase under the permitting stage.

2021 Outlook

Robust demand and supply disruptions are expected to lift the market of iron ore and pellets in 2021. Robust demand from China is also anticipated to push the demand for seaborne bauxite and aluminium in 2021.

Copper demand is likely to go up in 2021, on the back of growing momentum in electric vehicle space.

Stock Information - The stock of RIO last traded at AUD127.740 on 22 February 2021, up by ~3.6% from its last closing price.


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