Rio Tinto posts $866M loss, blames deteriorating economy

‘Certainly the game has changed, ‘ he said.

It made a net profit of $9.1 billion ($US6.5 billion) past year.

(RTPPF.PK,RIO.L,RIO,RTNTF.PK) were losing around 7 percent in the morning trading in London after the mining giant reported a loss for its fiscal year 2015, compared to profit last year, amid steep decline in commodity prices. Rio Tinto operates iron ore portfolio.

Rio Tinto was insistent it was weathering the commodities storm in its full-year results on Thursday, but the numbers were telling a different story – with net earnings down nearly £5bn. But a 10.8 percent slump so far in February has the index set for its biggest monthly fall since 2008, and it is down 16.4 percent so far this year.

Outside of 2010, iron ore prices have fallen every year one month after the Chinese New Year.

“In light of the significant deterioration in the macro-economic environment and the resultant market uncertainty, the board believes that it is no longer appropriate to maintain the progressive dividend policy”, Rio said. “For 2016, we intend that the full year dividend will not be less than 110 U.S. cents per share”.

“A number of people have criticised a progressive dividend policy in a cyclical industry”, Chief Executive Sam Walsh said. “We don’t run our business on hope”, he said.

Most of the commodities it mines have seen prices collapse over the past year with iron ore, in particular, declining by 80%. It will cost Rio $US4.1 billion.

Miners and other commodity-related firms such as oil majors have been slashing jobs and investment to take account of the pullback in demand for their products – particularly in China.

Rio aimed to slice a further $2 billion off operating costs over the next two years, after having cut $1.3 billion last year, beating its own goal. RBC Capital assumed coverage on Rio Tinto plc in a research report on Tuesday.

Rival BHP Billiton does is expected to kill off its policy at its interim earnings later this month, and slashes its $US6.6 billion annual payout. Then, in December, Anglo American said it would suspend dividend payouts as it outlined plans for a sweeping restructuring that would include cutting 85,000 jobs-more than half its workforce-and selling mines. There’s little point in putting additional pressure on any company’s cash flow during a tough period and so it makes sense to cut back on items that aren’t required, such as dividends.

To the extent that Rio and other miners like BHP are culpable of negligent judgment it would be for sticking to the progressive dividend policy for the past two years.

On Thursday, he defended the scrapping of that policy as a “prudent” move.