HEARD IN ASIA: Rio Tinto Investors Stay Upbeat Amid a Robust Iron-Ore Outlook [Wall Street Journal]
Summary: The outlook for shares of Rio Tinto has changed drastically compared to a few months back. Instead of a 5%-15% decrease in iron-ore prices from next April, an increase of up to 15% is now expected, thanks to robust Chinese demand, and restricted production capacity at the Big Three in iron exports: Companhia Vale do Rio Doce, Rio Tinto and BHP Billiton. According to a Daiwa Securities analyst, Rio Tinto's 2007 earnings are nearly 50% "leveraged" to iron-ore, compared to 16% for BHP. Price negotiations are underway between the miners and Japanese mills, and China, led by Baosteel Group is expected join in late November. Morgan Stanley rates Rio Tinto a "buy," with a price target of A$95/share, J.P. Morgan "overweight" A$105, UBS "buy" A$95, Daiwa "buy" A$91, and Merrill Lynch "buy" A$95. Rio Tinto's ordinary shares closed at $78.47 today.
Related links: Earnings conference call transcript: Rio Tinto half-year 2006 • Rio Tinto: Q3 Operations Review • Metal Miners Rattled by Fears of a Global Economic Slowdown • Miners Want Their Fair Share • A Few Miner Adjustments: BHP Billiton & Phelps Dodge • Is it Too Late to Buy Base Metal Miners Rio Tinto and BHP Billiton?
Potentially impacted stocks and ETFs: Rio Tinto (RTP) -- 1 ADR = 4 ordinary shares, Companhia Vale do Rio Doce (RIO), BHP Billiton (BHP) • SPDR Metals & Mining ETF (XME)
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