Rio Tinto scraps progressive dividend, reports 51 pct loss

Mining giant Rio Tinto Group has scrapped its progressive dividend policy as it posted a 51 percent loss in full-year earnings as commodity prices continue to plunge.

Rio's underlying profit fell to 4.54 billion U.S. dollars in 2015 from 9.3 billion U.S. dollars a year earlier, recording a net loss of 866 million U.S. dollars as the global mining industry was battered with plunging commodity prices, with key iron ore prices falling to six year lows.

Contributing to the net loss was 1.8 billion U.S. dollars in write-downs, mainly relating to its Samandou iron ore project in Guinea, Energy Resources Australia (ERA) and the Roughrider uranium project.

"With the continuing uncertain outlook, the board believes that maintaining the current progressive dividend policy would constrain the business and act against shareholders long-term interests," Rio Tinto chairman Jan du Plessis said in a statement to the Australian Stock Exchange after the close of trade on Thursday.

"We are therefore replacing the progressive dividend policy with a more flexible approach that will allow the distribution of returns to better reflect the company's position and outlook."

Rio's Australian shares closed 52 Australian cents, or 1.25 percent lower to 40.99 Australian dollars on Thursday, but the companies shares aren't likely to suffer a major downturn on Friday as the results are hardly a surprise, but will stay lower for longer, IG chief market strategist Chris Weston told Xinhua.

"A much less rigid (dividend) setting and flexibility is clearly a better way to run a resource company right now," Weston said.

"At the end of the day, investors should be thinking return of their equity and not return on their equity (in the current climate)."

The London-based Rio Tinto joins rivals, Brazil-based Vale and Swiss giant Glencore Plc in making stark changes to their dividend policy as a safeguard to its balance sheet while under pressure from investors and ratings agencies to conserve cash as collapsing prices continue to hurt.

Global ratings agency Standard & Poor's has previously said it would downgrade Rio Tinto and BHP Billiton if they were to stick with their progressive dividend policies.

The producer's dividend was maintained at 2.15 U.S. dollars per share, however shareholders should expect the 2016 dividend to be slashed, but will be no less than 1.10 U.S. dollars per share.

Chief executive Sam Walsh said 2015 was a tough year, but "2016 is shaping up to be even tougher" from the continued deterioration in the macro environment.

Rio, like the world's largest miners, are continuing to leverage their market position and drive more low-cost production to force out high cost producers.

In January, Rio indicated it would step up output to meet 2016 guidance of 350 million tons of iron ore and an already oversupplied seaborne market that's seen iron ore prices and companies' share prices tumble.

Rio has again slashed capital expenditure by three billion U.S. dollars over the next two years, with a further 1 billion U.S. dollar cut in operational costs in 2016, and another 1 billion U.S. dollar cost cut in 2017.

However Rio is surviving better than most other global miners, reducing net debt to 13.8 billion U.S. dollars. Endit