Rio Tinto Bloomberg

Bloomberg has an excellent video interview this morning with Rio Tinto CEO Sam Walsh. The commodities giant released annual results this morning with net earnings of $6.5 billion. Rio managed to beat estimates with higher output and lower cost even with the collapse in the iron ore price .

Mr. Walsh mentioned in the interview he sees growth in China gradually slowing from 7.4% to 7% this year which could mean lower commodity prices.

Rio has positioned itself with a strong balance sheet by reducing debt by over $9.5 billion dollars in the last year alone. The dividend has been increased by 12% and a $2 billion dollar share buy back was announced with the annual results.

Many analysts are forecasting a lower iron price even as low as $30 per tonne. Regarding the iron ore price he sees more stability this year in supply and demand and therefore price.

Rio Tinto is the lowest cost producer in the world and producing at an cash cost of $17 per tonne while selling for $62 per tonne. At these price levels Rio is making very healthy margins and continues to improve the business.

When pressed if Rio will stand up and cut production if iron ore falls further Mr. Walsh mentions Rio invests for the long term and to remember the commodity business is cyclical. Assets Rio is investing in are low cost high quality tier 1 assets that are long term investments.

Rio has rejected rumours of any potential mergers with Glencore in the last year.

A clean balance sheet with $12 billion in cash could lead to acquisitions but many assets on the block do not interest Rio being high cost operations. Rio prefers to build organically going forward again investing in low cost high quality long term assets.

Video: Rio Tinto CEO Sees Stable Iron Ore Supply, Demand in 2015

Read:  Rio Tinto delivers underlying earnings of $9.3 billion and announces a 12 per cent increase in full year dividend and a $2.0 billion share buy-back