Rio Tinto has warned of tough conditions ahead after the mining giant posted its weakest underlying profit in more than a decade.
The company said it benefited from a recent rebound in iron ore prices that has been led by strong demand from China's steel and construction sectors, but warned the market remained volatile and prices would come under pressure in the near term.
"We expect overall market conditions to remain volatile and challenging,"newly-appointed chief executive Jean Sebastien Jacques told reporters.
"We want to ensure that under any kind of market environment in China, we remain cash flow positive."
The company made a half year net profit of $US1.7 billion ($A2.25 billion), more than double its half year profit a year ago as smaller impairment charges and foreign exchange gains played to its advantage.
However, underlying profit for the six months to June 30 slumped 47 per cent from a year ago to $US1.56 billion, reflecting the prolonged decline in commodity prices.
Underlying earnings fell in the company's main iron ore, aluminium, and copper and diamonds operations, but rose in energy and minerals.
Prices of iron ore - Rio Tinto's main revenue earner, have largely remained above $US50 a tonne since March following the commodities rout in 2015, but are still down more than two thirds from their 2011 peak value.
"The credit-fuelled bounce in Chinese construction activity has had a positive impact on commodity markets in the first half of 2016, but its impact has been uneven," Rio Tinto said in a statement.
"The global economy seems stuck in a subdued low-productivity growth pattern which would indicate that continued caution is required for the second half of 2016."
Rio Tinto reported a $US866 million annual loss in 2015 amid the collapse in commodities prices, forcing the company to end its generous dividend policy and outline further cuts in capital expenditure and operating costs.
The global miner said it would pay an interim dividend of 45 US cents a share, higher than market expectations of about 40 US cents. Rio Tinto also reaffirmed its commitment to pay dividends of $US1.10 a share for the full year, outlined at the time its payout policy was revised in February.
The company has maintained its full year shipment guidance of 350 million tonnes of iron ore, despite posting slightly weaker-than-expected June quarter volumes.
Rio Tinto said its capital expenditure is expected to be $US4 billion in 2016 and $5 billion in 2017.
WEAKER PRICES DENT RIO TINTO'S UNDERYLING PROFIT
- Half year net profit of $US1.71b, up from $US806m
- Underlying earnings down 47pct to $US1.56b
- Interim dividend down 62.5 cents to 45 US cents per share
BREAKDOWN OF RIO TINTO'S PERFORMANCE
- Iron ore earnings down 17pct to $US1.74b
- Aluminium earnings down 52pct to $US377m
- Copper & diamonds loss of $US67m vs profit of $US393m
- Energy & minerals earnings up 11pct to $US82m