Rio Tinto reported first-half 2026 adjusted earnings per share of $4.21, meeting analyst consensus estimates, while consolidated sales of $31.028 billion missed the expected $32.030 billion by 3.13%. The mining giant delivered a 47% year-on-year increase in profit after tax to $6.7 billion, driven by a 28% rise in underlying EBITDA to $14.8 billion and a 75% surge in free cash flow to $3.8 billion. Chief Executive Simon Trott attributed the strong performance to favorable commodity prices, robust execution across key assets, and accelerating productivity benefits.

The company declared an interim ordinary dividend of $3.4 billion, a 43% increase from the prior period, supported by a 50% payout ratio. Although sales missed the specific consensus target, they still represented a 15% increase from $26.873 billion in the same period last year. Operating cash flow increased 32% to $9.2 billion, reinforcing the balance sheet which saw net debt decrease slightly by 2% to $14.1 billion at June 30, 2026.

Financial Performance Highlights

Operational excellence remained a key pillar, with copper equivalent production growing 3% in the first half. Pilbara achieved its highest first-half iron ore production since 2018, while aluminum operations sustained strong performance. Major growth projects are progressing as planned: Simandou achieved first high-grade iron ore sales in April, with mine construction and port infrastructure more than three-quarters complete. In lithium, Rio Tinto secured first production at Fénix 1B and Sal de Vida ahead of schedule, supporting ramp-up toward ~200 ktpa Lithium Carbonate Equivalent capacity by 2028.

What the Numbers Show

The divergence between revenue growth (+15%) and EBITDA growth (+28%) indicates significant margin expansion, driven by both volume increases and cost efficiencies. The company’s ability to generate $3.8 billion in free cash flow despite $5.0 billion in capital investment highlights disciplined spending and strong operational leverage. Furthermore, the rise in underlying return on capital employed (ROCE) to 17% from 14% demonstrates improved capital efficiency. The substantial increase in taxes and government royalties to $5.6 billion (from $4.8 billion in H1 2025) reflects the higher profitability base, though it remains a key cost component to monitor.

Rio Tinto and the Western Australian Government have signed non-binding agreements with Yindjibarndi WaterCo for the proposed sale of their respective joint venture shares in the Dampier Seawater Desalination Plant. The transaction establishes a framework for Yindjibarndi WaterCo to acquire and operate the facility, which is central to the region’s long-term water security. This move aligns with Rio Tinto’s strategy to unlock capital and deliver value for shareholders by divesting assets that are no longer core to its operational ownership model, while ensuring continued water supply through partnership.

The parties are expected to finalize a binding deal by the end of the year. Terms of the transaction remain confidential, with the final sale price contingent on construction costs and related factors. Rio Tinto will retain responsibility for managing the construction activities until completion, after which operational control is proposed to transfer to Yindjibarndi WaterCo. This transfer is subject to a binding divestment agreement, comprehensive due diligence processes, and relevant regulatory approvals.

The Dampier Seawater Desalination Plant is a critical piece of infrastructure with a total construction budget of A$1.1 billion. Upon full completion, it is expected to provide 8GL of desalinated water annually into the West Pilbara Water Supply Scheme. The project is being delivered in two stages, both of which are currently under construction or nearing completion.

Construction of Stage 1, which has a 4GL annual desalination capacity, is expected to be completed this year, with first water anticipated in early 2027. This stage is designed to significantly reduce abstraction from the Bungaroo aquifer, which holds cultural significance for the Robe River Kuruma People. Stage 2 construction has also commenced and will add a further 4GL of annual capacity, with first water expected in 2027. Stage 2 aims to alleviate pressure on the Millstream aquifer, which is culturally significant to the Yindjibarndi People.

Western Australian Premier Roger Cook stated that the government is delivering the plant as part of its Seven Cities vision for regional Western Australia. He emphasized that the infrastructure will support Karratha’s growing population and provide secure water supplies for job-creating projects, thereby diversifying the city’s economy. Cook noted that the potential acquisition by Yindjibarndi WaterCo would empower Traditional Owners while protecting culturally significant water sources in the Pilbara.

Strategic Implications

The proposed divestment reflects Rio Tinto’s disciplined approach to capital allocation and its commitment to working with partners to deliver long-term value. Rio Tinto Iron Ore Chief Executive Matthew Holcz highlighted that while the company will continue to receive 4GL of water annually from the plant to offset abstraction from the Bungaroo aquifer, it does not need to own and operate the infrastructure.

Yindjibarndi Water Chairperson Michael Woodley described the agreement as a step toward self-determination for the Yindjibarndi People. He noted that the deal delivers a secure, long-term economic return and enables the growth of operational capability through employment, training, and contracting arrangements. The Yindjibarndi People acknowledged the Western Australian Government and Rio Tinto as partners, along with capability partners The Right Water Company and Affinity Capital Group, for delivering this milestone.