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The Winu project. Image: Rio Tinto.

Rio Tinto has stood on the strength of its iron ore portfolio and declared a substantial dividend despite the impact of COVID-19.

The company is paying a dividend of $US1.55 per share despite its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) dropping by 6 per cent this half year.

The dividend, which is payable this September, is a 3 per cent increase on 2019 first half.

UBS analyst Glyn Lawcock said that Rio Tinto achieved solid result in difficult times, and its dividend represented a 53 per cent pay-out in line with three-year average.

“Despite the challenging (COVID-19) backdrop, we generated underlying EBITDA of $US9.6 billion, with a margin of 47 per cent, driven by our strong and stable operations, with all of our assets continuing to operate throughout the first half,” Rio Tinto chief executive Jean-Sebastien Jacques said.

This is attributed to “stable” iron ore prices in contrast to the lower prices for aluminium and copper.

Rio Tinto chief financial officer Jakob Stausholm said COVID-19 had reduced aluminium prices as demand from the automotive sector had significantly shrunk.

The aluminium industry faced fundamental challenges coming into 2020 and the pandemic had made this worse, he added.

China, on the other hand, recovered its appetite for the company’s high quality iron ore exceedingly better than the global economy.

“This means that China effectively absorbed the additional iron ore diverted from weaker steel markets in Europe and Asia,” Stausholm, speaking at Rio Tinto’s half-year 2020 results meeting, said.

“So far this year, supply has been constrained, as it was in 2019. These factors led to high iron ore prices, similar to the same period in 2019.”

Rio Tinto also maintained its exploration spending this year as it increased activity at the Winu copper-gold project in Western Australia.

The mining major spent $US280 million ($390 million) on total exploration while reducing its greenfield expenditure during the first half of this year.

The company reinstated its commitment to deliver on all existing projects and spend $US20 billion of expenditure over the three year period of 2020–2022.

In acknowledgment of the Juukan Gorge incident this year, Stausholm described it as a “sad low point.”

“I deeply regret this and you have my full commitment to working with my colleagues to learn the lessons and ensure that the destruction of sites of national significance, such as the Juukan rock shelters, never occurs again,” he said.

This was echoed by Jacques, who vowed to never destroy sites of national significance again.

“As border restrictions ease, I will continue to spend time on country with as many Traditional Owners as possible,” he said.

“… It is absolutely clear – we must learn from what happened at Juukan. Our immediate focus is our partnership with PKKP (Puutu Kunti Kurrama and Pinikura People).”

Rio Tinto reconfirmed its 2020 production guidance across all commodities including at its iron ore operations in the Pilbara region, Western Australia. The company’s productivity on site has been “impressive”.

The $US2.6 billion Koodaideri iron ore project in Western Australia is also progressing, with production ramp up still expected to occur in early 2022.