"But with your logic of the rearview mirror do you really think...

"But with your logic of the rearview mirror do you really think RIO is going to pay future Divs like the past, Copper and aluminium are roughly down 20% and the cost of processing it is much higher than iron ore?"

That's a totally flawed take, I'm afraid.

In the first instance, let's consider commodity prices.:
While copper price might be down from its May 2024 peak, that peak was 35% higher than the start of 2024, so it's hardly a representative reference point. More relevant is that the current copper price is still almost 10% higher than the average the preceding 12 months. For its part, the aluminium price is about in line with the 2023 average.

So, forget about short-term spikes; the thing that matters for profitability over any given financial period is the average price over that period, and the current prices for copper and aluminium are respectively higher, and in line with the preceding financial period averages.

Next, consider volumes:
In iron ore, RIO's Pilbara operations will deliver between 323m and 338m tonnes for FY2024 (it has calendar year-end). In JH2024, it shipped 158mt, meaning a 9% increase in shipments in the current half vs JH2024.

And then next year, the first ore from Simandou is scheduled, starting at 30mtpa (~14mtpa RIO's share) and ramping up to 6ompta (27 mtpa RIO's share).

So that will take RIO's iron ore production from around 330mtpa today to 360mtpa, an 8% increase in volumes.

In copper the percentage increase in copper output is even more pronounced: RIO is finishing the commissioning the massive Oyu Tolgue copper mine in Mongolia - and it really is massive @450,000 tpa (RIO interest =66%), which will make it the third-largest copper mine in the world.

So that will add ~300,000 tpa to RIO's current $690,000tpa output, so a whopping 43% increase, commencing now and increasing to full capacity by 2027.

[For comparative context, FMG has guided to shipments this year of 190mtpa-200mtpa, not much different to FY2024's 191.6mt result. So there is a stark difference in the respective organic volume stories for these two companies: one has negligible volume growth; the other has it aplenty.]

So, after investing significantly over the past several years in expanding its core commodities of iron ore and copper, what RIO has, which FMG lacks, is organic-driven volume growth for the next several years.

And, as you should be aware, the high degree of operating leverage in these sorts of businesses, means that mere modest increases in sales volumes translates into meaningful increases in bottom-line earnings.

Because of this volume growth it means that RIO is not reliant on commodity prices to underwrite growth in earnings, and hence dividends.

All of the above informs why analysts have RIO's dividends increasing over the coming few years, while FMG's are being forecast to more than halve (source: CommSec consensus data):

RIO Dividends ($/share) and prospective DY:
2024e: 6.44 (5.4% DY)
2025f: 6.52 (5.6% DY
2026f: 6.89 (5.8% DY)

FMG Dividends ($/share) and prospective DY:
2024e: 1.97 (9.3% DY))
2025f: 1.15 (6.1% DY
2026f: 0.94 (5.0% DY)


So for those that own FMG for the income, Caveat Emptor!

Because - unless the falling iron ore price does a 180 degree about turn in a meaningful way - you are about to take a hefty pay cut.

.