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Rio profits plunge but optimism holds

RIO TINTO, the world&rsquo;s second-largest miner, yesterday blamed the collapse in metal prices for plummeting pre-tax profits, but was cautiously confident about the future.<br /><br />London and Sydney-listed Rio reported first-half pre-tax profit was 56 per cent lower than the same period in 2008, at $4.3bn (&pound;2.6bn).<br /><br />But the miner said that it had eased its debt woes with recent asset sales &ndash; including the disposal earlier this week of its aluminium business, Alcan, for over $2bn &ndash; and a $15.2bn rights issue.<br /><br />Its debt pile stood at $39.9bn on 30 June, but has since been reduced by $14.8bn through the proceeds of the fundraising.<br /><br />&ldquo;Rio Tinto is now a stronger, fitter business and we can now look to the future with a higher level of confidence,&rdquo; chief executive Tom Albanese said. <br />However, he was cautious about a recent rally in metals prices.<br /><br />&ldquo;If current markets are any indication, I expect to see more stable and possibly stronger trading conditions in the second half,&rdquo; he added, echoing the outlook given last week by rival BHP Billiton.<br /><br />Rio&rsquo;s bottom line was hit by a $195m break fee paid to Chinalco for spurning the Chinese state-owned group&rsquo;s planned $19.5bn tie-up in June, in favour of an iron ore joint venture with BHP.<br /><br />The key challenge for Rio Tinto now is to resolve a stalemate with Chinese steel mills on price talks for iron ore, its biggest earner, amid tension with the Chinese government over the arrest of four staff in Shanghai on suspicion of bribery.<br /><br />While concerned about the detained staff, Albanese said Rio was relieved that the grounds for their arrest were not as serious as the spying allegations first made.