Iron ore rally fires up Rio Tinto’s commodity merry-go-round
Mining company super profits appear to be back on the agenda as earnings stand to be turbo-charged by higher than expected prices for iron ore and other metals, while volumes are also likely to be strong. It is the stuff of dreams for mining company bosses: high prices and strong production that can be sold into a rally. Iron ore has been the standout so far in 2017, and as the steel-making ingredient surged to its highest level in three year above $90/tonne, so too will profits at the three major producers, Brazil’s Vale and the Anglo-Australian pair of Rio Tinto and BHP Billiton. Investors have already had a little taste of what may come, with Rio raising its dividend above market expectations when it released results last week. The miner increased its payout to $1.70 a share and announced a $500m share buyback, meaning it is paying out about 70% of its underlying earnings to shareholders. If the company continues with that sort of payout ratio, shareholders may be in for a bonanz...
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