Mining giant Rio Tinto (LON, ASX, NYSE:RIO) reported Thursday a loss for 2015 after metal prices, particularly iron ore and copper plummeted last year and are still trading at historical lows.
The world’s second biggest mining company, which posted a loss of $866 million, has also abandoned its promise to maintain or steadily increase its dividend annually each year. Rio said it could no longer justify such commitment because of deteriorating economic conditions.
The Australian mining giant said it now believes that Chinese demand is extremely uncertain and global cuts to production of many commodities won’t be enough to lift prices sharply enough.
Chief executive Sam Walsh said this year’s annual dividend could be roughly half the $2.15-a-share payout declared for 2015.
“We don’t run our business on hope, we run it with foresight and focus,” Rio’s boss said.
Walsh noted market conditions were “tougher than expected,” adding that the company will embark on a new round of cost-cutting measures to reduce operating costs by a further $1bn in 2016, followed by an additional goal of $1bn in 2017.
He said the firm will begin by reducing capital expenditure to $4 billion this year and $5 billion in 2017, which is $3 billion less than previously announced.
Rival BHP Billiton (ASX, NYSE:BHP) (LON:BLT), the world’s No. 1 mining company, will announce results on Feb. 23, and is widely expected to have to follow Rio Tinto in scrapping intentions of maintaining or steadily growing its annual payout.
Rio Tinto closed slightly down Thursday in Sydney, to A$40.99, and was trading about 2.7% lower in London to 1,718p in late afternoon.
Watch CEO Sam Walsh speaking about the company’s results: