By Malcolm Maiden
Rio Tinto's underlying $US5.2 billion profit for the June half is down sharply from $US7.6 billion a year earlier, but should be good enough to support the mining group's share price: the market consensus estimate was that the mining group would post a $US4.9 billion profit.
The result shows what the slide in commodity prices in the past year has done, but if Rio is no longer right on its sweet spot, it's still close.
Iron ore is its key product, accounting for about three quarters of its earnings, and while the iron price fell from around $US170 a tonne to $US134 in the year to June, Rio is still selling iron for about $US80 a tonne more than it costs it to extract primarily from its Pilbara open-cut mines in north-western Australia.
Rio produced 120 million tonnes of iron ore in the June half alone, and aims to get to 353 million tonnes a year by 2015, so it's a hugely lucrative business, even at the lower prices.
And if the slide goes on?
One question is what happens if the price of iron ore and other commodities continues to slide.
Even then, however, the top-tier miners including Rio and BHP Billiton are best placed. Their mines sit at the bottom of the cost curve and at the top of the league tables for production volumes.
Competitors with more marginal operations will fall by the wayside before they do if the price decline continues. That outcome would see a tightening of supply and a pushback on the price slide.
Seasoned observers still think that the shifts under way amount to a cyclical downturn in a much longer bull market for commodities.
There's an issue in Rio's heavy dependence on iron ore as China morphs into a consumer-led economy. It will need less steel and more consumer commodities such as copper as that happens.
Other industrialising countries are, however, following in China's wake. That means for the biggest and best miners, solid profit margins are likely to continue for years to come.