In the process, the Australian major exceeded its $3 billion operating cash cost reduction target six months ahead of schedule, while producing record volumes and driving productivity improvements across all its businesses, CEO Sam Walsh said.
The company said it also shipped record iron ore volumes, set production records for iron ore and thermal coal and delivered a strong operational performance in copper.
“We have decreased net debt by $6 billion compared with this time last year through our stronger operating cash flows, sharply reduced capital spend and proceeds from divestments,” Walsh said.
“We are confident Rio Tinto’s low cost, diversified portfolio will continue to generate strong and sustainable cash flows over the coming years.
“This solid foundation for growth will result in materially increased cash returns to shareholders, underscoring our commitment to deliver greater value.
“Our outstanding half-year performance reflects the quality of our world-class assets, our program of operational excellence and our ability to drive performance during a period of weaker prices.
“These results show that our current strategic and management focus is making a meaningful contribution to cashflow generation.”
Rio announced a decrease in net debt in the first half of $1.9 billion to $16.1 billion at June 30, 2014, down from $22.1 billion at June 30, 2013.
RBC Capital Markets expected net debt of $18.4 billion.
The company also reduced its adjusted total borrowings by $2.5 billion in the first half to $25.7 billion at June 30, 2014.
Walsh had promised to slash the company’s massive net debt, which peaked at $22.3 billion 12 months ago, yet analysts were divided as to how successful Rio would be at doing this.
Rio reduced its capital expenditure to $3.6 billion in the first half, while its 2014 capex is expected to be about $9 billion, $2 billion below previous guidance, and about $8 billion each year from 2015.
London Metal Exchange prices of aluminium averaging 9% lower since the 2013 first-half did not stop Rio achieving earnings before interest, tax, depreciation and amortisation of $1.1 billion in the commodity, up 26% on the 2013 first-half.
Having completed the review of the Kitimat modernisation project, total approval capital stands at $4.8 billion.
“Net earnings of $4.4 billion reflect $0.8 billion of further impairments related to Kitimat, non-cash exchange rate gains of $0.6 billion and other excluded charges of $0.5 billion,” the company said.
The company also increased its interim dividend by 15% to 96c per share, while its underlying earnings per share rose to $2.77.