Miners could hoard record 2010 profits

THE world’s biggest miners could keep dividends in check despite being forecast to double their billion-dollar 2009 profits, fund managers warned yesterday.

Companies such as BHP Billiton, Rio Tinto, Xstrata and Anglo American are set to report record 2010 results in the next two weeks on the back of a commodity price boom fuelled by demand from China.

But hefty capital expenditure programmes and the pursuit of expensive acquisitions mean investors may be disappointed.

“There is a general expectation in the market that mining companies will signal some form of cash return through either share buy back or special dividends,” said Malcolm McPartlin, a fund manager at Aegon Asset Management.

“But my feeling is they will probably disappoint, because these companies are looking to invest further in organic growth opportunities or M&A deals.”

Rio Tinto is expected to make about $14bn (£8.7bn) pre-tax profit when it reports its full-year 2010 results on 10 February, up from $4.9bn in 2009. Anglo American is due to double its full-year net profit to almost $5bn. BHP Billiton, the world’s biggest miner, is forecast to make $30.5bn profit before tax, up from $19.6bn a year earlier.

Neil Gregson, manager of the JPM Global Mining Fund at JP Morgan Asset Management, said he expected miners to raise dividends cautiously.

“Mining companies are going to be generating a lot of cash flow this year but they all have a lot of capital expenditure planned as well,” he said.

But some are issuing large payouts, with Brazilian iron ore miner Vale has pledging a $4bn dividend.