Iron ore accounted for 77% of Rio Tinto's total underlying earnings in 2016, as the mining giant returned to profitability in the second-half of the year on a recovery in commodity prices.
In 2016, Rio Tinto's iron ore division contributed underlying earnings of $4.61 billion -- up 17% year on year -- to total earnings of $6.06 billion. The miner attributed the improvement to a 6% year-on-year rise in the average Platts 62% index in 2016, lower production costs, and stronger sales.
Iron ore was also the strongest performer in terms of EBITDA margin, with sales from Western Australia achieving a margin of 63% on an FOB basis.
Speaking to the media Wednesday, Rio Tinto's chief executive, JS Jacques, said the company was unconcerned by any slowdown in China and expected Beijing to continue to stimulate the economy.
Jacques said he would not be drawn on a price outlook for iron ore, but highlighted key drivers that would be supportive of prices, which included the health of the Chinese economy and the government's move to push out inefficient and polluting steel capacities.
"This would be an opportunity for us, as there will be a switch from low-grade to high-grade iron ore," he said.
He expected an additional 40 million mt of iron ore to come on stream globally this year, and said there had been "no material sign" of Chinese domestic iron ore restarting on higher prices.
But Jacques admitted there was "uncertainty" around a possible supply response from Chinese iron ore producers in the warmer months if prices remain robust.
"A few years ago, China produced 400 million mt, last year it was between 250 million mt and 275 million mt, and the question is, will they move back to 300 million mt plus," he said.
Rio Tinto reported a net profit of $4.6 billion for fiscal 2016 (January to December), an increase of $5.5 billion from a loss of $866 million in 2015.
