The Rio Tinto Limited (ASX: RIO) share price has not performed as well in February as investors would have liked. In fact, with only a couple of hours left of trading for the month, the S&P/ASX 200 Index (ASX: XJO) mining share has fallen around 9% since the start of February.
That's around three times the fall of the S&P/ASX 200 Index (ASX: XJO), which has shed almost 3% over the same period.
While changes to the iron ore price can have a major impact on the business, Rio Tinto shares have seen most of the falls occur after the miner reported its result.
Let's have a look at some of the highlights from the report for the 12 months to 31 December 2022.
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Earnings recap
Rio Tinto reported that operating cash flow dropped 36% to US$16.1 billion. Free cash flow declined 49% to US$9 billion. Net profit after tax (NPAT) dropped 41% to US$12.4 billion.
The underlying earnings per share (EPS) fell by 38% to US$8.20, so the ordinary dividend per share was cut by 38% to US$4.92.
With no special dividend paid for the 2022 financial year, the total dividend per share was cut by 53%.
The business finished 2022 with net debt of US$4.2 billion, a reversal of the US$1.6 billion of net cash it had at the end of 2021. It did spend US$3.8 billion on the acquisitions of Turquoise Hill Resources and the Rincon lithium project.
Rio Tinto explained that the result reflected "the movement in commodity prices, the impact of higher energy and raw materials prices" on its operations, as well as "higher rates of inflation" on its operating costs and closure liabilities. The average iron ore price was 25% lower in 2022 compared to 2021. The average copper price was 6% lower.
Looking at the mid-point of its guidance for 2023, it's expecting iron and copper mining costs per unit to increase. Iron ore shipments are also expected to increase.
Greenfield exploration
Rio Tinto continues to look at potential new projects. It's working in 18 countries across seven commodities and spent $253 million in 2022.
The bulk of the company's exploration spending was focused on copper projects in Australia, Colombia, Namibia, Peru, the US, and Zambia; diamonds in Angola; and heavy mineral sands projects in Australia and South Africa.
It's also exploring for nickel in Canada and Finland, and for lithium in all regions, with "opportunities emerging in the US and Africa".
When will huge dividends return?
Rio Tinto's board said the level of dividend takes into account the result for the financial year, the outlook for major commodities, the long-term growth prospects of the business, and the company's objective of maintaining a strong balance sheet.
The board also said it expects total cash returns to shareholders over the longer term to be in a range of between 40% to 60% of underlying earnings in total through the cycle. Additional returns could be paid in "periods of strong earnings and cash generation".
With the Rio Tinto dividend payout ratio being 60% for FY22, Rio Tinto may be suggesting there could be another dividend decrease unless resource prices keep performing in 2023.
Rio Tinto share price snapshot
While the Rio Tinto share price noticeably fell in February, it's been relatively flat since the start of 2023 and has risen around 20% over the past six months.
