SA News • Wed, Dec. 17
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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 • Fri, Oct. 17
- 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.
Even With Weak Iron Prices, Rio Tinto Looks Like A Relative Bargain
- Iron ore prices have been very weak this year, but Rio Tinto's position at the bottom of the cost curve allows its to stay FCF positive much longer than most.
- Improvements in the aluminum and copper operations are long-await and still uncertain, but could drive upside in the coming years.
- Rio Tinto seems like a relative bargain in the mining sector, with a 6x multiple supporting a fair value in the mid-$60s.
- We are very selective when it comes to adding any commodity-equities exposure to our newsletter portfolios.
- Rio Tinto is trading on the cusp of the low end of its fair value range, and the firm is attractive on a relative valuation basis.
- We include Rio Tinto in the Best Ideas portfolio, which continues to perform well.
Rio Tinto: Investors Discount Rio Tinto's Strategic Long-Term Value
- Rio Tinto obviously trades at a depressed valuation with an earnings multiple of 8.8x.
- Investors overestimate the importance of short-term commodity prices and discount Rio Tinto's long-term strategic value for economic growth.
- Rio Tinto remains an interesting anti-cyclical bet on a resurging Chinese economy.
- Goldman Sachs has forecasted the price of iron ore will reach $80 per ton within the next two years.
- This decline in the price of iron ore will hurt Rio Tinto’s top line in the coming years, causing an adverse effect on the company’s earnings as well.
- Rio Tinto does not seem to be able to sustain its dividend increases in the coming years; especially since it already has a very high dividend payout ratio.
- Rio Tinto was downgraded by Citi Analysts and others early last week.
- The Spot Price for Iron Ore continues to fall and be a negative with respect to projected earnings for Rio Tinto.
- Rio Tinto had strong positive information with respect to their most recently issued earnings report.
- Rio Tinto is more diversified than other mining companies within the Iron Ore industry, but it doesn't derive enough profit from this activity.
- Rio Tinto shows us how other Iron Ore companies can become successful. While Rio Tinto is strong company, it does not offer enough of a bargain for the potential investor.
Rio Tinto: A Ridiculously Undervalued Mining Company With Excellent Growth Prospects
- Rio Tinto is a seriously undervalued commodity play.
- The company creates value for shareholders via cost reductions and capex alignments.
- Rio Tinto could trade at 13-15x forward earnings when China's commodity hunger awakens.
- China contributes about 35% to the total revenue base of Rio Tinto and its urbanization projections are too optimistic to be realized.
- The company previously raised considerable debt to make acquisitions; however, due to ill-advised acquisitions, the company’s balance sheet weakened with enormous debt and fluctuating profits.
- Considering that 77% of the company’s EBIT is dependent upon iron ore, the expected metal price dip will significantly effect the bottom line.
Wed, Dec. 17, 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.
Mon, Dec. 15, 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.
Mon, Dec. 15, 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
Sat, Dec. 13, 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.
Tue, Dec. 9, 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.
Fri, Dec. 5, 4:50 PM
- Vale (NYSE:VALE) says it may consider an out-of-court settlement to the massive lawsuit in which it has been accused of “stealing” a west African mine from rival Rio Tinto (NYSE:RIO).
- The suit alleges that Vale and former partner Beny Steinmetz worked together to misappropriate Rio’s rights to the Simandou iron ore deposit through corruption.
- Rio says it lost billions of dollars in assets and investments made before its Simandou rights were revoked, and claims it is entitled to treble damages.
Fri, Dec. 5, 3:45 PM
- Bernstein analysts found some positives to take away from yesterday’s investor presentation from Rio Tinto's (RIO -1.5%) Sam Walsh, including the CEO's insistence that a potential mega-merger with Glencore (OTCPK:GLCNF, OTCPK:GLNCY) would prove "a poor strategic match" and that Rio was not planning any major acquisition to protect itself from a potential takeover.
- Walsh reiterated a number of times that the miner would materially increase shareholder returns, "leaving little doubt about Rio Tinto’s intention"; the analysts also say Rio's balance sheet could surprise on the upside, with a one-time gain potentially boosting free cash flow without borrowing.
- One reason Rio may be undervalued: Rio’s stake in the Pilbara arguably is the best mining business in the world, but the market does not yet agree with only a 5x EV/Ebitda multiple on the stock.
Thu, Dec. 4, 2:16 PM
- BHP Billiton (BHP -0.6%) is reiterated with a Market Perform rating but a reduced target price of ~$63 vs. $73 earlier at Bernstein, which calls the mining giant a “colossus with feet of clay."
- Despite BHP's impressive portfolio of high quality assets, "this is not enough [for] a premium rating to a company that must place a premium rating on [its] products... something that BHP appears to be unwilling to do, preferring a strategy of volume over price.
- Bernstein also does not believe BHP can afford to increase its dividend except through an increase in gearing, which makes it different from Australian peer Rio Tinto (RIO -2.7%) - neverthless, RIO is downgraded to Underperform from Buy at BofA Merrill Lynch on lower iron ore prices.
- Vale (VALE -1.5%) also sees its stock price target lowered, to $10 from $12 at RBC, amid the subdued outlook for iron ore and near-term funding challenges.
Thu, Dec. 4, 10:38 AM
- Rio Tinto (RIO -2.8%) says its focus remains on improving mining operations and delivering more cash to shareholders, rather than becoming involved in disruptive mergers and acquisitions.
- “There is no question our world-class assets will generate sustainable returns for decades to come,” Rio CEO Sam Walsh says at an investor seminar in London.
- Rio says its total capex during 2014 fell 34% Y/Y and is below the $8.5B forecast, while operating and exploration costs have been cut by $5.4B since 2012; it also says it has achieved its mid-teens debt target and is now adopting a net gearing ratio-based target range of 20%-30% to protect investors and provide flexibility.
- The market widely expects another takeover attempt by Glencore after Rio rejected an approach earlier this year, but Walsh says it will not alter his strategy.
Mon, Dec. 1, 11:38 AM
- BHP Billiton (BHP -1.5%) iron ore president Jimmy Wilson said this weekend that plunging iron ore prices had been anticipated given their forecasts that supply growth would exceed the growth in demand, and signals there will be no slowdown in the drive to boost production by global iron ore producers.
- “Even the iron ore price where it is today can induce more volume,” Wilson told Australia’s Nine Network, and "if that volume doesn’t come from our business, it’s going to come from other businesses around the world and other countries around the world.”
- Bernstein analyst Paul Gait recently said: "If BHP do not value the products that they mine but are quite happy to dump them on the market whatever the price, then it is hard to see why anyone should value the company associated with such activity."
- Also: RIO -0.2%, VALE -3.4%, CLF -7.6%.
Fri, Nov. 28, 2:58 AM
- After years of heavy spending, Rio Tinto (NYSE:RIO) says it is committing to give significantly more money back to shareholders in 2015 despite a sharp slide in iron-ore prices.
- "Looking out over the next five years, we expect to generate strong free cash flow and we remain committed to materially increase cash returns to shareholders in a sustainable way," announces CEO Sam Walsh.
- Iron-ore prices have slumped by around 50% this year after a surge in mine supply swamped the market.
Tue, Nov. 25, 8:58 AM
- Iron ore trades below $70 for the first time in five years, as rising low-cost supplies by the world’s top miners widen a global glut amid slowing demand from China.
- Ore with 62% content delivered to Qingdao fell 1.2% to $69.58/dry metric ton, the lowest since June 2009, and has dropped 48% YTD.
- “The biggest problem is on the supply side as majors like BHP and Rio are pushing huge volumes into the lackluster demand environment," says Bernstein's Paul Gait, who adds that $65 "feels like a floor."
- BHP -1.8%, VALE -0.6%, RIO -0.4% premarket.
Mon, Nov. 24, 6:28 PM
- Various hedge funds were told this month by a prominent London mining banker to prepare for an all-but-inevitable takeover of Rio Tinto (NYSE:RIO) by Glencore (OTCPK:GLCNF, OTCPK:GLNCY), Bloomberg reports.
- Former JPMorgan Chase dealmaker Ian Hannam, who now runs a boutique advisory firm, reportedly convened reps of more than 20 investors to share his views on the potential deal, perhaps intended in part to help position his firm to win a role in the transaction.
- Glencore said last month it had abandoned a bid for Rio after a July proposal worth ~$160B was rebuffed.
Mon, Nov. 24, 12:57 PM
- Mongolia's parliament on Friday appointed a new prime minister, more than two weeks after the ouster of his predecessor amid an economic crisis prompted in part by the stalled Oyu Tolgoi mine expansion.
- Given that the new PM had been a cabinet member for the past three years and would have been involved in discussions about Oyu Tolgoi, analysts say the change does not bode well for any real breakthrough.
- Oyu Tolgoi, 66% owned by Rio Tinto (RIO -2.2%) subsidiary Turquoise Hill (TRQ -1.1%), has the potential of adding 30% to Mongolia's GDP, but the underground expansion has been held up for years due to disputes about funding.
Mon, Nov. 24, 7:53 AM| Comment!
Wed, Nov. 19, 12:26 PM
- Iron ore prices extend their historic decline, approaching $70/dry ton in a retreat to the lowest level in more than five years, as analysts rule out any Chinese restocking that typically supports prices towards the end of each year.
- The price is now at a level at which all but the three biggest low-cost producers - Rio Tinto (RIO -2.4%), BHP Billiton (BHP -3%) and Fortescue (OTCPK:FSUMF -8.8%) - are either generating losses or are struggling to break even.
- Steel stocks also are getting whacked: SCHN -5.4%, X -4%, PKX -3%, AKS -3%, CMC -2.7%, STLD -2.5%, NUE -1.6%, MT -1.3%.
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.
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