Miners Drop as Rio Tinto Plans Dividend Cut Amid Profit Plunge

  • FTSE 350 Mining Index Declines as Glencore, BHP retreat
  • Nickel prices drop to the lowest since 2003 in London

Walsh Sees a Tough 2016 For Rio Tinto, Worse Than 2015

Mining shares fell after Rio Tinto Group, the world’s second-biggest metal producer, said it could cut its dividend by as much as half as a collapse in commodity prices ravages profits. Nickel dropped to the lowest since 2003.

Rio fell as much as 9.1 percent in London, the biggest intraday loss since 2011. The FTSE 350 Mining Index fell 2.3 percent, with Glencore Plc and BHP Billiton Ltd. both dropping more than 3 percent. An index of 18 base-metal producers tracked by Bloomberg Intelligence fell as much as 4.4 percent.

Rio joined companies including Glencore and Anglo American Plc in cutting or scrapping payments to shareholders as miners grapple with metal prices at the lowest since 2009. Global mining companies are under pressure from investors and credit ratings agencies to conserve cash. A lower dividend could also give Rio the financial headroom to buy assets at knockdown prices as competitors are forced to restructure.

“Rio did not need to reduce dividends and actually walks away from the opportunity to becoming the only high-dividend yield name in the space,” Paul Gait, a mining analyst at Sanford C. Bernstein Ltd., said in a note to investors today. “We see only one explanation for that strategy: the group wants to grow.”

  • Nickel fell 3.6 percent to settle at $7,595 a metric ton on the London Metal Exchange, after touching $7,550, the lowest since 2003. Tin and zinc also fell in London, while copper, aluminum and lead were higher.
  • Glencore reported a 6 percent fall in fourth-quarter copper production after suspending output at mines in Africa. It also agreed to a $500 million deal with Franco-Nevada Corp. to sell precious-metals output from a mine in Peru.
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