Rio Tinto Limited (ASX: RIO) has just released its FY20 fourth quarter update. Are Rio shares a reliable bet today?
What did Rio Tinto announce?
The mining giant said that in the fourth quarter of FY20 its iron ore shipments of 88.9 mt was up 2% year on year and up 8% quarter on quarter. Iron ore production of 86 mt was up 3% year on year, though it was flat quarter on quarter.
Looking at other production numbers in year on year terms, bauxite production fell 12% to 13.3 mt, aluminium production rose 4% to 815 kt, mined copper production fell 4% to 132.5 kt, titanium dioxide slag dropped 5% to 272 kt and Iron Ore Company of Canada (IOC) iron ore pellets and concentrate production rose 7% to 2.7 mt.
The company said that it achieved a strong performance across the Pilbara iron ore network in 2020, despite impacts from Cyclone Damien in the first quarter and COVID-19 disruptions which also resulted in the deferral of maintenance to the second half. Shipments of 330.6 million tonnes were 1% higher than 2019 and production of 333.4 million tonnes was 2% higher.
Management comments
Rio Tinto CEO Jakob Stausholm said: “We are working to restore trust with the Puutu Kunti Kurrama and Pinikura (PKKP) people. Some important progress has been made as set out in the joint statement issued in December following a meeting between the PKKP and Rio Tinto boards. We are also developing additional measures to strengthen our partnerships with Traditional Owners, including a commitment to modernise and improvement agreements, particularly in the Pilbara.”
Summary thoughts
The damage that Rio Tinto has done to its reputation may take a long time to heal, the destructive event should never have happened.
However, on the existing mine side of things, Rio Tinto is doing well to keep delivering strong results each quarter. It’s coming at a really strong time for the iron ore price, so Rio Tinto’s profit and share price is likely to remain elevated.
Rio Tinto’s dividend may be impressive in the shorter term, but it’s impossible to say how long the iron demand will stay high. Could China keep buying lots of iron ore for just the next six months, or the next six years? That’s not the type of bet I want to make. It’s not a wise idea to buy resource shares at a high point of the cycle.
There are other ASX dividend shares I’d rather buy for the long term such as Magellan Financial Group Ltd (ASX: MFG) or Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
