Rio Tinto is turning a page into a new chapter. Discounting the fleeting rally in commodities prices, much remains to be written.

In its first results announcement under new Chief Executive Jean-Sébastien Jacques, the mining giant announced Wednesday a higher-than-expected dividend of $0.45 per share under its recently changed dividend policy and a doubling of net earnings for the year to June. As he took the helm, Mr. Jacques shook up the top brass last month. His arrival also signals a shift away from the pure cost-cutting mode of recent years.

Rio continues to cut, of course, slashing $580 million of operating costs in the first half, likely putting it on track to cut a planned $1 billion this year. And since 2012, it has cut costs by a total of $6.8 billion. But with an industry still on tenuous footing, Rio may feel it is nearing a point where cost-cutting starts to take away from growth.

That can be seen in approvals for new investments Rio has undertaken, including plans to allot $4 billion to capital expenditures this year and an additional $5 billion next year. On Tuesday, Rio announced an incremental $338 million investment in an iron-ore mine. It reiterated its commitment of $5.3 billion to a Mongolian copper mine and a $1.9 billion Australian bauxite mine.

Investing in focused growth projects, though, is predicated on the hope that commodity prices will recover to a level where Rio Tinto can keep its shareholders happy. Another option is acquisitions, but for Rio, those have typically come with disappointing shareholder returns.

Mr. Jacques should want to stick to his “build and buy smart” motto, given that miners continue to traverse a pricing cycle that is failing to show a permanent lift. Iron ore, which accounted for 60% of Rio’s earnings before interest, tax, depreciation and amortization to June, has rallied this year, but each bump in price just emboldens miners to churn out more, keeping a cap on price. And as Mr. Jacques noted on a call with the media, when it comes to Chinese demand, the “bulk of demand was underwritten by credit availability.” That doesn’t auger well for prices. Rio’s next chapter will take a long time to play out.

Wall Street Journal

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