Copper And Aluminum Plug A Potential Profit Hole For Rio Tinto

Mining giant Rio Tinto reported a 43% surge in June half-year profit to $6.85 billion, driven by robust demand for copper and aluminum. The global data center boom and Middle East conflict fueled this growth, with copper earnings soaring 84% and aluminum up 38%. While iron ore remained the largest profit contributor at $6.8 billion, its earnings dipped 1% as Chinese steel production peaks. CEO Simon Trott highlighted a "step change in performance," noting copper, aluminum, and lithium now comprise over 50% of underlying EBITDA, diversifying the portfolio. He emphasized the "extraordinary" investment case for data centers, which are heavy users of these metals, forecasting $1 trillion in hyperscaler capital expenditure next year. Rio Tinto's share price rose 2.75%, and shareholders received a 43% higher interim dividend. The company aims to free up $5 billion by year-end.

The global data center building boom coupled with war in the Middle East has boosted demand for copper and aluminum and helped big miner Rio Tinto lift its June half-year profit by 43% to $6.85 billion.

The Anglo Australian company reported earlier today that underlying pre-tax copper earnings in the latest six months rose by 84% to $5.7 billion. Underlying pre-tax aluminum earnings rose by 38% to $3.3 billion.

Iron ore, which has been Rio Tinto’s cash cow for the past 20 years faded to deliver pre-tax earnings of $6.8 billion, down 1% but strong enough to remain the major profit divisional generator, albeit one which is declining as Chinese steel production peaks.

Rio Tinto’s consolidated sales revenue in the latest half-year rose by 15% to $31 billion. Free cash flow was up 75% at $3.8 billion.

Shareholders have been rewarded with a 43% increase in their interim dividend to $2.11 a share, up slightly on a payout of $2.04 forecast by investment bank analysts.

The better-than-expected profit and dividend sparked a surge in Rio Tinto’s share price which rose by A$4.46 (2.75%) on the Australian stock exchange to trade at A$166.82 (US$116.70).

Rio Tinto chief executive, Simon Trott, described the half-year result as ‘step change in performance’.

"Our continued investment in growth drove a 3% increase in copper equivalent production and further strengthened our portfolio diversification with copper, aluminum and lithium contributing more than 50% of underlying Ebitda (earnings before interest, tax, depreciation, and amortization).

The shift in focus away from iron ore dominance has come just in time for Rio Tinto as the price of the steel making mineral continues to decline and the Chinese Government via a commodity buying agency demands further price cuts.

Trott said the investment case for data centers, which are heavy users of copper and aluminum in electricity supply and cooling, is ‘extraordinary’.

“Hyperscaler capital expenditure is forecast to reach $1 trillion next year, which is a lot of copper, aluminum and lithium,” Trott said.

He dismissed a suggestion that the data center boom could slow because of issues related to the supply of electricity.

“The pace of construction might fluctuate but the long-term direction is clear. The build-out of data centers will happen,” he said.

Trott said that Rio Tinto remained on track to free up to $5 billion by the end of the year through asset sales and productivity improvements.