Rio Tinto reveals an 18% drop in underlying earnings

Rio Tinto has revealed an 18% drop in underlying earnings, down to US$4.2bn, in the first half of the year.

It blamed lower metal prices and higher taxes for the decline.

Rio also put on hold its efforts to sell its aluminium business interests after it couldn’t find a buyer.

The FTSE 100 miner did, however, sweeten the pill for investors with a 15% increase in its interim dividend which this year will by 83.5p per share.

It also said that cash flows were improving thanks to cost saving ‘momentum’ and highlighted progress with a number of significant projects.

The ramping up Oyu Tolgoi copper-gold mine in Mongolia is now consistently operating above 80% of its design capacity.

At the same time the group’s large, 290mln tonne, expansion of its iron ore operation in Australia’s Pilbara region is on time and on budget. The ‘first tonnes’ from the expansion are due next month. The Kestrel coking coal mine is now in production and is ramping up, and the Argyle diamond mine was recently commissioned.

By the end of the year Rio expects to have spent US$14bn, US$7bn less than in 2012.

"Our business has demonstrated considerable resilience against a backdrop of continuing market volatility,” said chairman Jan du Plessis.

“Cash flows from operations were strong, driven by our cost savings programmes but lower prices and a higher tax rate led to a reduction in underlying earnings to US$4.2 billion in the first half of 2013.

"Our strategy to invest in and operate large, long-life, low-cost, expandable operations remains unchanged.”