Miners must bury a dividend distraction

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Interesting analysis, wonder what influence MRRT(an output Tax) and the Carbon tax will have on the deployment of capital?!

I still struggle with the frequent justification of mobs like Rio reinvesting their capital, rather than returning the cash flows to shareholders, particularly given the cyclical nature of their business.
What in the hell is wrong with a discipline to maximise the operating cash flow returns to shareholders, coupled with the SHAREHOLDERS being asked to provide the necessary capital when major expansions are planned? Let the management make the case for major capital investment, to encourage shareholders (and others) to avail themselves of the opportunity when sound investment is proposed by the company.
To date, the shareholders in Rio have watched on while an egomaniacal management and board sunk $B's into dud investments (e.g. Riversdale) because they only had to convince themselves.
Just how much money have Rio sunk because they believed they were beyond having to justify the virtue of major capital outlays to the owners of the company?
It's hubris. Give me the Westfarmers model, any day.

On the subject of capital returns, the dual listed miners could do well for themselves and shareholders to take advantage of the trading differential between uk and Australian listed stock with a uk-listed stock buy back.

the key take away from this piece is that, due to the long lead time, high capital cost nature of mining, and the non renewable resource base, unlike banks, miners HAVE to reinvest cash, just to stay in business. SB is right (as usual) in saying that it is the quality of those investment decisions which are in focus. The free kick from the pricing phase of the resources boom is over, but subject to the commodity, prices are still good.
There should be no question that Rio's shareholders best alternative for their profits is to reinvest in their supreme iron ore business, and via asset sales finance some dividend growth (maybe special dividend), or an acquisition of high quality and based on better valuations due to lower commodity price outlook...

Interesting Stephen, its all about capital. Yes we know that! Rio does not and BHP have expressed the need to stop dreaming and actually run a business, not a miners club.

Harsh words, so, lets look at critical mass. We have all seen when "Companies are too big to fail", now lets look at "Too big to be profitable". In terms of a nuclear reaction, there is a limit to how many protons an element can hold. Just one more, will cause critical mass - no warning, just instant destruction.

Business is no, different, it relies on years on planning, for capital allocation, to produce a product for an unknown market. If it is successful, then the share price will rise and the rapid traders will be happy. Yet the investors will have their capital tied, for little reward (relative to risk).

So, how about the AUD? the miners were the cause of the high AUD and the commensurate rewards to the shareholders were negligible. Chaos was created in the eastern economies, sure we adjusted and its good to buy your coffee, from someone with a uni. degree. Although perhaps it makes the education system somewhat farcical, when plumbers, builders and economists cant find work.

So, lets get back to the big picture, capital expenditure in mining, creates problems, yet capital return to investors, just helps GDP.

OK Stephen, looks like BHP and RIo are a sell.