Angus Taylor • Yesterday, 10:17 AM
There is research on this stock available only to PRO subscribers.
From other sites
at CNBC.com (Jan 19, 2015)
at MarketWatch.com (Jan 16, 2015)
at CNBC.com (Jan 16, 2015)
at Zacks.com (Jan 16, 2015)
at Zacks.com (Jan 16, 2015)
at Nasdaq.com (Jan 16, 2015)
at MarketWatch.com (Jan 15, 2015)
at Investor's Business Daily (Jan 14, 2015)
at Investor's Business Daily (Jan 14, 2015)
at MarketWatch.com (Jan 14, 2015)
Rio Tinto: Why Plunging Commodity Prices Mean This Stock Will Struggle In 2015Angus Taylor • Yesterday, 10:17 AM
- Rio is a key short idea within the mining sector.
- Recommendation is based on falling commodity prices, particularly the bear market for iron ore which is down -49% in the last year and comprised 85% of Rio's net income in 2013.
- There is a supply-demand imbalance in the iron ore market which is expected to worsen, and continued weak demand from China will keep base metals prices low.
- Bullish arguments relating to strong cash flow generation are too optimistic given the underlying issues caused by falling commodity prices, and a potential takeover from Glencore is improbable in the current environment.
- The stock is only down 5% in the last year despite significant earnings downgrades. Net present value of Rio will be badly affected by write-downs and lower sales.
Rio Tinto 2014 Operations Review: Sharp Rise In Iron Ore Production Volumes
- International mining company Rio Tinto (NYSE: RIO) recently reported its operational performance for the final quarter of 2014 as well as the full fiscal year 2014.
- Rio Tinto’s iron ore production in 2014 accounted for 79% of global iron ore output and stood at 234 million tons.
- Iron ore shipments from Rio Tinto also amounted to 79% of global shipments and stood at 240 million tons. Sales grew 18% as compared to 2013.
- With prices of iron ore in particular dropping, the only way to improve margin growth going forward would be to focus on its low-cost deposits.
- The company’s current low period of share prices would present an ideal entry point and it does have dividends as well as an 18% upside in share price to offer.
A Potential 5% Yielder: Rio Tinto Increases Shareholder Distribution Despite Low Iron Ore Price
- Rio Tinto expects another dividend raise when the full year results are reported in February.
- Furthermore, the announcement of a buyback program seems likely.
- These moves make Rio Tinto more and more attractive for dividend investors.
Rio Tinto Is The Lowest-Cost Iron Ore Miner - But Is It A Buy Today?
- Rio Tinto has the lowest cash costs among the major iron ore miners.
- The company is diversified, and has operations in several adjacent sectors.
- Even at the current low iron ore prices, Rio Tinto generates strong cash flow and is able to keep a healthy balance sheet.
- I’ll be walking through part of the investor presentation with readers.
- I’ll cover the company’s goals and the interesting things about how the company is presenting their results.
- The focus on cutting costs will be important because of the downturn in commodity prices.
- Rio Tinto’s management has indicated that the company achieved their goals of debt reduction, but some competitors are still heavily focused on debt reduction.
- If Rio Tinto has strength in the balance sheet, the company may be able to acquire assets at attractive prices and reduce future depletion charges.
Update: Rio Tinto Poised To Increase Shareholders' Returns
- Metals and minerals industry has been experiencing depressed pricing environment.
- Rio Tinto is working on the right strategy to cope with challenging business environment.
- Rio has potential to increase its returns for shareholders.
Rio Tinto: Attractive Investment For Income-Oriented Investors
- Strong cash flow despite lower iron ore prices.
- Reduced future financial leverage allows to increase dividend payout ratio.
- Volume growth helps offset some of the effect of lower iron ore prices.
- Still risk of further decrease in iron ore prices.
Rio Tinto: Continuing Iron Ore Expansion Is Unlikely To Boost EarningsVladimir Zernov • Oct. 17, 2014
- Rio Tinto reports another quarter of iron ore production growth.
- Iron ore continues to dominate Rio Tinto's earnings profile.
- Iron ore price downside will likely offset production increases.
Mining For Investment Returns From Rio Tinto
- Rio Tinto Group is back in the news, having rebuffed a mega-merger offer from Glencore plc that would have created the world’s largest mining company.
- As the price of iron ore alternately falls and plummets, we take a look at the prospects for an independent Rio;
- One of the world’s largest low-cost producers.
Rio Tinto And The Iron Ore Version Of 'Dancing Until The Music Stops'
- Major iron producers like Rio Tinto are engaged in what could be a dangerous game of supply brinkmanship.
- Rio and others seem to assume that the destruction of high-cost competition can be surgically executed without collateral damage to the entire industry and themselves.
- I see parallels to the attitudes in the financial industry in 2007 that make me what to remain short Rio Tinto until severe market imbalances show sign of change.
- Last week, iron ore prices touched a 5 year low of $78.60 per tonne. Goldman Sachs is bearish on iron ore prices for the next three years.
- Rio Tinto's 3D mapping technique will reduce its production cost.
- The current fall in Rio Tinto's share prices is a buying opportunity.
Rio Tinto: Contrarian Investment At A Ridiculous Valuation?
- Rio Tinto suffers like other basic materials companies from low/falling raw material prices.
- Iron ore prices have just marked a five year low and put additional pressure on mining companies.
- Long-term investors see the opportunity to buy a leading mining business with excellent growth prospects at nine times earnings.
Q&A: Will My Investment In Rio Tinto Continue To Be Dead Money?
- Rio Tinto's share price muddled along for 4 years.
- Iron ore prices hit a 5 year low of $85 per ton.
- Since 91% of Rio Tinto's operating profit during 1H 2014 came from iron ore, this clearly worries investors.
- Investors are wondering: Will their investment continue to be dead money?
How Will Job Cutting In Australia Impact Rio Tinto?
- The job cutting plans came into place because the company wants to remain competitive and reduce costs, in the wake of declining coal demand and falling coal prices.
- Coal prices are declining because of a fall in the demand for coal, and excess supply of coal due to too many mine expansion plans.
- Rio Tinto does not plan on any major capital expenditure and is focused on restructuring its coal portfolio.
- There is uncertainty about future revenues, though operating costs are expected to decline.
- Buying of these shares is not recommended because the coal market is not showing signs of improvement in the nature, which is ultimately bad news for the company as well.
- The metals and minerals industry is facing supply and demand dynamics.
- Rio has been working on a right strategy which is driving growth.
- Rio’s cash position is strengthening quarter over quarter which reduces any potential risk to its balance sheet and returns.
- Rio is a good stock to hold.
- These two companies have seen recent share price decreases, yet offer investors outstanding and sustainable dividends.
- Both have opportunities to capitalize on initiatives aimed at increasing profit and market share.
- The market, in my opinion, is undervaluing these companies due to overstated fears about future earnings.
- Past the industry bottom, investors in cyclical mining stocks like Rio Tinto have the best opportunity for share price gains by buying early in the cycle.
- Cost cutting, lower capex and the lowest operational costs yet support earnings. Debt can be paid down and a capital return via special dividend or share buyback becomes more possible.
- Long-term, market leaders with the best profit margins and deepest pockets for future growth have the best chance of raising share prices and paying decent dividends.
Mon, Jan. 26, 8:31 AM
- Iron ore prices extend their retreat to the lowest levels in more than five years, due to slower demand growth for steel in China as the largest mining companies add to supply.
- Ore with 62% content delivered to Qingdao, China, fell 4.3% to $63.54/dry metric ton, the lowest price since May 2009, and extends its 11% YTD decline.
- Goldman Sachs last week joined other global banks in cutting price forecasts for 2015, predicting a return to a bull market is probably more than a decade away.
- VALE -2.5%, BHP -0.5%, RIO +0.4% premarket.
Fri, Jan. 23, 11:18 AM
- Iron ore miners are broadly lower after Goldman Sachs becomes the latest global bank to deliver a dismal outlook for the steel-making ingredient, forecasting an average price of $66/metric ton this year from an earlier estimate of $80.
- Goldman is at least the fifth bank this month to lower estimates, citing rising seaborne supplies and weaker demand growth from China; just last week, Citigroup cut its iron ore forecast to $58 in 2015, down from its earlier $65, and UBS lowered its target to $66 from $85.
- Low-cost expansions likely will continue as major producers are still mining iron ore at a profit, which would expand the global seaborne surplus from 47M tons this year to 260M tons by 2018, Goldman says.
- Iron ore miners: VALE -8%, BHP -3%, RIO -3.6%, CLF -7.6%.
- Copper miners: FCX -2.6%, SCCO -2.4%, TCK -2.6%.
- Steel companies: X -6.3%, MT -7.1%, AKS -3.2%, NUE -1.2%, STLD -3%, CMC -3.8%, TMST -2.4%.
- Earlier: Goldman gives in on mined commodities
Tue, Jan. 20, 10:28 AM
- Rio Tinto (RIO -1.1%) says its flagship iron ore division produced 295.4M metric tons for FY 2014, up 11% Y/Y and narrowly beating its target of 295M metric tons but coming in slightly below analyst expectations.
- Rio sold even more during the year, shipping 302.6M metric tons of iron ore and 17% higher than 2013, as it attempts to ensure it can afford to give shareholders a special round of dividends or share buybacks ahead of any future overtures from Glencore.
- Rio continues to defy critics as a supply glut pushes iron ore prices to a five-year low, saying it plans to produce 330M metric tons of iron ore from the Pilbara in 2015, up 18% from a record 280.6M tons in 2014, which was 12% higher Y/Y.
- "Putting more material into an oversupplied market may seem foolish, but if you’re the best at what you do and the higher-cost mines drop out, why wouldn’t you do it?" says one Melbourne-based fund manager.
Wed, Jan. 14, 12:39 PM
- Citi cuts price targets for iron ore to $58 for 2015 and $62 for 2016, down from its prior estimates of $65 for both years, and lowers its outlook for thermal and met coal.
- Citi warns its downwardly revised forecast means it now expects earnings for major mining companies will fall by 9%-21% for 2015 and by 3%-16% in 2016.
- Rio Tinto (RIO -2.5%) is the exception, as Citi sees earnings rising 7.1% this year and 10.6% next year due to the company’s greater exposure to the weaker Australian dollar.
- The firm cuts its price target for Glencore (OTCPK:GLCNF -7.2%) by 8% to £3.60 from £3.90 and sees earnings falling 21% and 16% respectively in 2015 and 2016.
- Citi says it is still bullish on the sector, but warns that metals and mining companies will only slowly grind higher over the next few years.
- Also: BHP -4.5%, VALE -5%, FCX -12%, SCCO -4.9%, TCK -9.7%, CLF -4.4%, CENX -9.1%, MT -4.2%, X -4.9%, NUE -3.4%, STLD -2.6%, BTU -9.8%, ANR -8.8%, ACI -8.9%.
Wed, Jan. 14, 10:53 AM
- Glencore (OTCPK:GLCNF -6.9%) tumbles to its lowest levels since the company went public in 2011, falling more than 10% at one point before recovering slightly.
- Glencore has long underperformed most other major global miners, thanks to its model combining mining and physical trading of commodities, and continues to do so today.
- Analysts also say the steeper fall in copper prices compared with iron ore so far this year could thwart any potential move by Glencore to take over Rio Tinto (RIO -2.2%), as "Glencore's commodity mix hasn't played in its favor in the last few week,s and Rio is looking more expensive as a consequence."
- Copper accounted for 38% of Glencore's operating profit in H1 of last year compared with Rio, which only generated 10% of its operating profit from copper during the same period.
Wed, Jan. 14, 10:28 AM
- Freeport McMoRan (FCX -10.8%) sinks to a 52-week low as copper prices fall 4.5% to collapse to 2009 levels, though it is off overnight lows after prices were down nearly 9% at one point in London.
- Other big global miners also are sharply lower: SCCO -7.3%, RIO -2.5%, BHP -4.4%, VALE -3.8%, CLF -5.8%.
- Concerns over a supply glut and slowing consumption in China have weighed on copper prices in recent months; copper is often seen as an omen for the global economy because it is used in a wide array of construction and manufacturing activities, so today's precipitous drop explains much of the weakness in global equity markets.
- The iPath Dow Jones UBS Copper Subindex Total Return ETN (NYSEARCA:JJC) is trading so heavily that nearly 60% of the average full-day volume traded in the first 10 minutes this morning.
- ETFs: CPER, CUPM, DBB, BOM, RJZ, BOS, BDD, JJM, RGRI, UBM, BDG, USMI, HEVY
Wed, Jan. 14, 7:57 AM
- Mining stocks look headed for sizable losses, as copper prices sink to five-and-a-half year lows and the World Bank lowers its forecast for global economic growth.
- Glencore (OTCPK:GLCNF, OTCPK:GLNCY) -11.5% in London trading, Antofagasta (OTC:ANFGF) -7% in London, Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) -9.5% in London, Vedanta (OTCPK:VDNRF) -18% in London, Rio Tinto (NYSE:RIO) -4.3% premarket in the U.S., VALE -2.9%, FCX -5.1%, CLF -2.6%.
- BHP Billiton (NYSE:BHP) -7.5% in London and -5.5% U.S. premarket after S&P Capital IQ downgraded shares to Hold from Buy, expecting "weaker commodity prices to increasingly impact on group profits as hedges expire and see currency headwinds from a stronger [U.S. dollar]."
- ETFs: XLB, XME, SLX, COPX, VAW, UYM, CU, IYM, HAP, IRV, MXI, SMN, GNR, GUNR, PICK, MATL, FXZ, PYZ, CRBQ, RTM, CCXE, FMAT, GRES, SBM
Mon, Jan. 12, 7:14 PM
- Fission Uranium's (OTCQX:FCUUF) "truly phenomenal" resource estimate for its PLS deposit has rekindled takeover speculation about the company, and CEO Dev Randhawa says investment bankers already have set up a data room for potential bidders.
- Fission said late Friday the deposit contains an estimated 105.5M lbs. of uranium resources, with more than half of the resource comprised of a high-grade zone that could potentially be mined at very low costs; the discovery is smaller than Saskatchewan's McArthur River and Cigar Lake mines, analysts say it compares favorably to everything else in the province.
- Fission needs the help of a major company for actual development into a mine; Cameco (NYSE:CCJ), Rio Tinto (NYSE:RIO) and France Areva are sometimes mentioned, but since the discovery is shallow and could be mined as an open pit, the CEO thinks it may draw interest from more general buyers such as Teck Resources (NYSE:TCK) that have no history in the region.
Mon, Jan. 12, 8:29 AM
- Rio Tinto (NYSE:RIO) says it plans to invest $500M in a diamond mining project in the central Indian state of Madhya Pradesh.
- Rio discovered the rich diamond reserves at Bunder in an underdeveloped region of the state in 2004 and got an initial approval for the mining project in 2012; now it is in process of getting environment and forests clearances from Indian authorities, the managing director of the company’s Indian operations tells WSJ.
- The Bunder deposit is the first diamond discovery in India in more than 40 years and one of only four new diamond mines globally which are likely to become operational in the next 10 years, Rio says.
Dec. 31, 2014, 7:35 AM
- "The major factor that undercut ore prices in 2014 was the Australian-led supply surge," says Morgan Stanley's Tom Price. "In terms of price downside, the worst is probably over."
- A late-year rally has prices down "only" about 50% for the year.
- The bear market occurred as low-cost supplies from the like of BHP Billiton (BHP, BBL) and Rio Tinto (NYSE:RIO) came online just as demand from China began to cool, and the market shifted to surplus in the middle of the year. Goldman Sachs sees the excess widening to roughly 300M tons by 2017 as past investments from the miners continue to lift supplies.
- Behind Morgan Stanley's quasi-bullishness is the idea of the price decline pushing high-cost producers to the sideline, a thought echoed by VALE CEO Murilo Ferreira last month.
Dec. 22, 2014, 6:15 PM
- Global iron ore producers fell today after Australia's Department of Industry slashed its iron ore price estimate by a third due to surging output, which has outpaced Chinese demand and growth, creating a surplus.
- Iron ore prices will average $63/metric ton, vs. $94/ton forecast in September and this year's expected average of ~$88, according to the government's latest quarterly report.
- Ore with 62% content delivered to Qingdao, China, fell 1.8% to $67.90/metric ton, the lowest price since June 2009 and extending this year’s rout to 50%.
- Not everyone is quite so gloomy: Prices appear oversold and there’s potential for a relief rally in H2 2015, Australia & New Zealand Banking says, forecast iron ore to average $80/ton, noting that any recovery will be driven by supply cuts, including high-cost mines in China, where the industry is losing at current prices.
- During today's trading: BHP -2%, RIO -1.8%, VALE -0.6%, CLF -7.9%.
Dec. 17, 2014, 7:07 PM
- A U.S. District Court today rejected Vale’s (NYSE:VALE) request to dismiss a lawsuit alleging it conspired with Israeli billionaire Benjamin Steinmetz to take a West African mine away from rival Rio Tinto (NYSE:RIO).
- The judge also dismissed Vale’s argument that the suit should be brought in an English court, saying Rio’s choice of a U.S. court is justified based on the plaintiff’s likelihood of obtaining jurisdiction over all of the defendants.
- The civil lawsuit, filed in April, alleges that Vale and its former partner Steinmetz worked together to take Rio’s rights to the Simandou iron ore deposit through corruption.
Dec. 15, 2014, 5:57 PM
- BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RIO) are amassing vast copper holdings in a push to capture a greater chunk of the $140B world market, apparently aiming to squeeze out high-cost producers just as they did in the global iron ore business, Reuters reports.
- Separately and in joint ventures, Rio and BHP intend to mine millions of additional tons of copper, despite seeing an oversupplied market for the next few years.
- While Rio and BHP likely would not hold the same degree of dominance over copper that they do in iron ore - Codelco, Glencore (OTCPK:GLCNF, OTCPK:GLNCY) and Freeport McMoran (NYSE:FCX) will remain bigger producers for the foreseeable future - their influence on global supply would be enhanced.
- The drive in copper also could give BHP and Rio an advantage over rival Vale (NYSE:VALE), whose exposure to copper is less than half that of BHP and Rio.
Dec. 15, 2014, 1:55 AM
- Rio Tinto (NYSE:RIO) and BHP Billiton (NYSE:BHP) are looking to replicate their iron ore strategy in the copper business, squeezing out high-cost producers by injecting more of the red metal into an oversupplied market.
- Separately and in joint ventures, Rio and BHP intend to mine millions of additional tonnes of copper, confident in the coming years that copper will be in short supply.
- Copper producers: OTCPK:GLNCY, FCX, TCK, SCCO
- ETFs: JJC, COPX, CU, CPER, CUPM
Dec. 13, 2014, 8:25 AM
- BHP Billiton (NYSE:BHP) iron ore chief Jimmy Wilson says the days of $100/metric ton iron ore likely are over amid a supply glut and weak Chinese demand.
- Iron ore fetched ~$135/metric ton a year ago, but it is now below $70 as output from global giants such as BHP, Rio Tinto (NYSE:RIO) and Vale (NYSE:VALE) increases, hurting higher-cost producers.
- "It's hard to see the sort of significant bump that we've seen come from China happen again," Wilson says.
- BHP general manager for iron ore marketing Alan Chirgwin says the company expects China's growth in consumption of steel - in which iron ore is a crucial component - to slow to 0.5%-1.5% next year.
Dec. 9, 2014, 8:29 AM
- Mining companies sink in premarket trading as J.P. Morgan lowers its iron ore outlook through 2017, predicting prices will extend declines as growth in low-cost supply from the world’s largest producers outstrips demand.
- Iron ore will average $67/metric ton next year, 24% less than previously forecast, $65 in 2016, down 23%, and $69/ton in 2017, down 16%, the firm says; iron ore has averaged $98.82/ton YTD but recently slumped to a five-year low $68.49.
- "The only way the oversupply can be averted is if the low-cost producers cut back on their growth targets," which is unlikely, JPM says, as "feedback from recent site visits to the Pilbara suggests there is currently no consideration for slowing capacity growth from either Rio Tinto or BHP Billiton."
- BHP -2.1%, RIO -1.2%, VALE -1.2% premarket.
RIO vs. ETF Alternatives
Rio Tinto PLC is an international mining group that engaged on finding, mining and processing the Earth's mineral resources. Its main products are Bauxite, Alumina, Copper, Gold, Molybdenum, Silver, Nickel, Diamonds and Rutile.
Other News & PR