Australian mining company Rio Tinto recently reported its highest annual profit levels in history including “record financial results” including free cash flow of $17.7 billion. This was mostly due to a boost in iron ore prices and the global economy finally beginning to recover from the COVID-19 pandemic that suppressed demand for some time.
The company reported a 116% increase in its net earnings from 2020 to 2021, to a profit after tax to shareholders of $21.09 billion. There was also an 88% increase in free cash flow which amounted to $17.7 billion, and $25.34 billion in net generated cash from operating activities in 2021, a 60% increase from 2020.
The increase in profit also comes from high demand from the company’s top customers in China, which accounts for more than half of the company’s revenue. Rio Tinto is the world’s biggest ore producer, and also runs operations that produce copper, aluminum, lithium and more.
“Our agenda is an ambitious, multi-year journey which we are determined to deliver and we have already taken the first steps, with underground operations under way following the Oyu Tolgoi agreement and a binding agreement to acquire the Rincon lithium project in Argentina,” he said in the press release.
Gold price rising from Ukraine and Russia conflict
Not only has the price and demand for iron ore risen over the last few months, but more recently, the price of another precious metal has risen due to fears and concerns surrounding the current ongoing conflict between Russia and Ukraine. The price of gold has risen to $2,000 per ounce as of Monday, March 7.
Kshitij Purohit, Lead of Commodities and Currencies CapitalVia Global Research explained that there is an increased demand for “safe haven assets” such as gold, due to the fear that the conflict between the two countries is causing.
“There are numerous reasons to believe that gold will rise, not the least of which are geopolitical concerns. The crisis in Ukraine continues to produce a lot of anxiety, and as a result, people have been flocking to safety assets,” he said.
The rise in gold prices amid declining high-grade gold discoveries is a boost for companies like Colombian-based Collective Mining (TSXV:CNL) which owns two of the most promising precious and base metal projects in Latin America, and is run by the former team that built Continental Gold. In March 2020, Continental Gold was sold for $2 billion (EV) to Zijin Mining out of China.
The Company has already completed multiple drill holes at the Olympus Central target within its Guayabales project, and recently released news of a major discovery at that target – its third overall discovery, in less than just one year of drilling activity.
Highlights include:
- OLCC-3 (Discovery hole): 301.9 metres @ 1.11 g/t Gold Eq. near surface, with visible gold and 34.2 metres @ 0.90 g/t Gold Eq.
- OLCC-3: Ended in high-grade mineralization
- OLCC-1: 116.3 metres @ 1.03 g/t Gold Eq. with visible gold
- The Olympus target (South, Central and North) covers an area of 1.25 km by 0.75 km and remains open for expansion
- Additional drill holes have been completed and assays are pending
As gold prices rise and major mining companies look to replace reserves after years of declining grade and exploration activity, it is refreshing to see companies like Collective Mining bring forth new, high-grade discoveries – the type of which will undoubtedly form the basis of future consolidation within the mining sector.
Specifically, as majors look to acquire new projects, it may be precisely these types of juniors, operating in safe and established jurisdictions with vast, highly-mineralized land packages, that meet the criteria of M&A activity in the future.
Jim Wyckoff, senior analyst at Kitco Metals also touched on the connection between gold prices and the issues between Russia and Ukraine.
“If we do not see some kind of a de-escalation (between Russia and Ukraine) soon, we are going to see gold at a record high sooner rather than later,” he said. From this standpoint, investment will continue to flow into the sector and specifically towards lower risk juniors offering exciting grade, areas for expansion and finally competent management teams with proven track records.
HedgeThink.com is the fund industry’s leading news, research and analysis source for individual and institutional accredited investors and professionals
