Rio Tinto Share Discussion Threads

[robrah] 12/8/2016 13:20

well I guess price of a share is only determined by broker price targets. as per christ.in which case christ is multi billionaire. christ one question what was the broker target you were promised when you bought at 40 quid plus ?? clearly that worked out well

[jdb2005] 12/8/2016 13:12

Robrah v Christh = draw.

Seems like each has an extreme position.

Went Long this morning at 2409 & expect to see it finish at 2445.

All the talk about a hike in miners tax in West Australia from minority party will not wash as threat of job cuts will not be palpable for families who vote next year.

[robrah] 12/8/2016 12:21

I expect 23 next weekfundamental not too rosy.and I don't pay attention to brokers notes.

[christh] 12/8/2016 12:03

Oversold.

I do expect a bounce back to £24.90

[christh] 12/8/2016 10:48

I do expect a recovery today to £24.90-£24.95.

Totally unjustified, company is trading very strong , momentum strong and the trend is up.

Hopefully next week will be close to £26 pending of course US trading upwards.

[christh] 12/8/2016 10:42

Bond investors’ confidence in Rio Tinto Group is reviving along with global commodity prices, raising the prospect of an improved outlook for its debt ratings.

The Anglo-Australian miner, which took an ax to costs after a multi-year decline in iron ore, is benefiting from a 36 % surge this year in the steelmaking material that accounts for more than half its profits. Aluminum, coal and copper have also gained.

Standard & Poor’s Global Ratings said it may shift its negative outlook on the company’s A- rating to stable, though stressed the improvement in commodities remains tied to Chinese demand growth. As prices have gained this year, the cost of insuring Rio’s debt has fallen and it’s the best performer this year in the 25-member iTraxx Australia index of credit-default swaps. Contracts for Rio have fallen 64 basis points to 137 as of Thursday, near the lowest level in 10 months, according to CMA data.

“With the strength we’ve had in some of the marquee commodities like iron ore, there’s no denying that the worst is behind us,” said Adrian Prendergast, an analyst at Morgans Financial Ltd. in Melbourne. “Looking forward, there’ll have to be an increase in confidence in the equity market and in the debt market as well.”


Commodities have rallied this year, with iron ore boosted by steel output in China, driven by the nation’s infrastructure and property sectors. Gold has surged on haven demand and shortages have emerged in some base metals, particularly zinc. The World Bank said last month that raw materials demand will strengthen in 2017, while Citigroup Inc. said in July that it’s bullish on commodities for next year.

“The recent rebound in metal prices, if sustained, could alleviate the downward rating pressure on miners, including Rio,” May Zhong, a Melbourne-based S&P analyst, said in an e-mailed statement. “However, in our view, metal prices remain very volatile and are sensitive to changes in raw material demand from China.”

S&P rates Rio at A-, the fourth lowest investment grade, while the producer’s score at Moody’s is at Baa1, the equivalent of one step lower. All three assessors have a negative outlook on the issuer.

Moody’s and Rio Tinto declined to comment on the prospect for changes to the outlook or to the producer’s ratings.

With Rio’s credit metrics likely to improve, S&P is expected “to change the outlook on its A- rating to stable from negative in the near term,” Deutsche Bank AG analysts including Gus Medeiros, Craig Nicol and Ken Crompton wrote in an Aug. 4 note. Moody’s is also likely to revise its outlook to stable and to consider a ratings upgrade to A3 next year, according to the analysts.

Rio, which this month reported first-half underlying earnings fell 47% compared to a year earlier, remains cautious over China, the top commodities consumer, Chief Executive Officer Jean-Sebastien Jacques said on an Aug. 3 call with analysts.

“There is lots of uncertainty around China,” said Jacques, who began his new post in July and has visited Chinese customers and authorities in recent months. “We need to make sure that under any kind of scenario, our assets perform well and are free cash flow positive.”

[christh] 12/8/2016 10:37

Nothing new, it was already factored in the price and rejected by most of the
mining companies

See here
Iron Ore Giants Reject Proposed A$7.2 Billion Mining Tax Hike

[christh] 12/8/2016 10:13

Rio Tinto: A Core Investment In The Mining Sector Despite The Dividend Cut
Aug.10.16 | About: Rio Tinto (RIO)

Rio Tinto reports acceptable half-year results and cuts the interim dividend by 58% to 45 cents.

The dividend for the full year will be at least 110 cents.
Higher free cash flow allowed to reduce net debt.
If iron remains at $55, Rio Tinto will surely continue to make progress.

Rio Tinto (NYSE:RIO), the world's second largest iron ore miner, reported half-year results on August 3. Underlying EBITDA fell 27% to $5,367M compared to $7,303M in the year before. Underlying earnings dropped 47% to $1,563M or $0.95 per diluted share.

Strong free cash flow enabled the company to reduce net debt from $13.8B at the end of last year to $12.9B on June 30, and gearing was lowered from 23% to 21%.

Underlying earnings are a key metric for Rio Tinto shareholders as they determine the dividend after the introduction of the new policy in February 2016. Total cash returns to shareholders shall be in a range of 40% to 60% of underlying earnings in aggregate through the cycle. The 45 cents interim dividend which was just declared is in the middle of that range and represents 52% of underlying earnings.

Nevertheless, it is a 58% reduction compared to the last interim dividend of 107.5 cents. Rio Tinto also stated that for FY16, the board's intention is the final dividend paid next year will be at least 65 cents per share.

Business Outlook

After the recovery of prices from their 10-year lows at the beginning of the year, the importance of iron ore for Rio Tinto's profitability is as high as it used to be in the past. Iron ore represents 60% of underlying EBITDA in the first half of 2016 and 82% of underlying earnings before other items.

Rio Tinto's Product Groups
Product Group Revenue
[$M]
1HY16 Revenue
[$M]
1HY15 Underlying EBITDA [$M] 1HY16 Underlying EBITDA [$M] 1HY15 Underlying Earnings [$M] 1HY16 Underlying Earnings [$M] 1HY15
Iron Ore 6,303 7,004 3,438 4,010 1,743 2,100
Aluminum 4,553 5,455 1,076 1,688 377 793
Copper & Diamonds 2,453 3,263 655 1,335 -67 393
Energy & Minerals 2,960 3,524 531 620 82 74
Other operations/
other items/
exploration/net interest -4 -12 -337 -350 -572 -417
Total 16,293 19,234 5,367 7,303 1,563 2,923

Source: Company website.

Iron ore is Rio Tinto's bright spot, and it will likely continue to be the driver for an improved business performance going forward. In 1HY16, Rio Tinto realized an average iron ore price of $44.5/wmt FOB basis, equivalent to $48.4/dmt. Pilbara cash unit costs fell to $14.30/ton, compared to $16.20 in the first half of 2015 . At present it seems that the iron ore price recovery can be sustainable, and assuming an average price of $55/dmt for the rest of the year, Rio Tinto's EBITDA in 2HY16 could grow by around $800M.

All other segments had to face stronger headwinds in the first half-year, and combined underlying EBITDA fell 38% or $1,381M from $3,463M to $2,262M. This compares to a $572M EBITDA reduction corresponding to a 14% decline for the Iron Ore product group.

Although some improvements can be expected in the second half of the year, the other product groups are unlikely to have a substantial positive impact on Rio Tinto's result. For Aluminum, the second largest segment, I expect a slightly improved performance based on constant volume and better pricing.

Not much progress can be anticipated from Copper and Diamonds. Copper is one of the few disappointments in the commodity sector as prices remain at depressed levels, and the red metal did not benefit from the broad mining rally of 2016. Volumes will not contribute to growth either as Rio Tinto's production will essentially remain flat in the second half-year.

Energy and Minerals is likely to see a stronger second half-year, driven by various factors. Prices for thermal coal recovered noticeably in recent months due to higher imports to China. Metallurgical coal prices are up as well inline with strong demand for steelmaking raw materials. The contribution of iron ore pellets from IOC (Iron Ore Company of Canada) which are reported under Energy and Minerals, will continue to increase on higher production volumes.

All these trends point toward higher cash flows in the second half of 2016. Net cash generated from operating activities of $3.2B in 1HY16 was 24% lower than in 2015, but capital expenditures of $1.3B ($1.1.B less than last year) and raising $0.6B through asset sales increased cash generation, allowing Rio Tinto to reduce net debt by $0.9B.

The reduced dividend in the second half-year will liberate additional cash. With the final payment in April 2016, the company distributed $1.9B to shareholders. The lower interim dividend of $0.45 will save Rio Tinto around $1.1B later in the year.

On the other side, capital and exploration expenditures will increase based on Rio Tinto's guidance of $4.0B for FY16. New projects and primarily the development of the Oyu Tolgoi underground copper mine in Mongolia with a projected investment volume of $5.3B and the Amrun bauxite project in Queensland with $1.8B remaining will increase capex in the near future. They will bring expenditures up to $5.0B in 2017 and $5.5B in 2018, including around $2.0B of annual sustaining capex.

Assuming an at least stable price environment for Rio Tinto's major products and predominantly iron ore, my estimation is that the company's operational performance will continue to improve which should lead to at least constant free cash flow. This should enable the company to reduce net debt further or possibly pay out more than the $1.10 minimum dividend.

Share Price and Dividend
With the strongest balance sheet and the lowest cost delivered to China, Rio Tinto remains the most solid of the major iron ore miners. This has not spared shares from falling nearly 50% to a low of $22 in January, but the stock has recovered nearly 50% since then.

Compared with its peers BHP Billiton (NYSE:BHP) (NYSE:BBL) and particularly Vale SA (NYSE:VALE), Rio Tinto has been less volatile.

Despite the dividend cut, Rio Tinto maintains an above average yield, higher than BHP's, not to mention Vale which suspended the dividend entirely. With the outlook of a minimum dividend of $1.10 for FY16, Rio Tinto yields 3.4%. As I said earlier, a healthy cash flow might even allow Rio Tinto to pay more than $0.65 final dividend, but it is too early to count on it yet.

Conclusion
Rio Tinto has mastered the commodity downturn quite well, and the stock bottomed earlier in the year. The company's balance sheet which already belonged to the strongest in the industry improved further after the debt repayment. I'm optimistic about Rio Tinto's near-term outlook and the stock remains one of the key holdings in my mining's portfolio.

Disclaimer: Opinions expressed herein by the author are not an investment recommendation, any material in this article should be considered general information, and not relied on as a formal investment recommendation. Before making any investment decisions, investors should also use other sources of information, draw their own conclusions, and consider seeking advice from a broker or financial advisor.

[christh] 12/8/2016 10:05

It is now oversold, very heavily oversold.

The trend is still upwards, not broken.
Opportunity knocks so do not missed to BUY with a short term target price of £26

[robrah] 12/8/2016 09:51

only rio tanked on this news . FMG and blt were positive

[christh] 12/8/2016 09:50

But in September everything is moving upwards as a build up for Xmas.
Also is US elections.

Doubt it but not dismiss it but on the other hand is the tropical season for
high winds and might disrupt supply.
China though is the driver as the demand might be high and RIO is an iron ore supplier but of High grade iron ore not the cheap low grade that others supply.
Also RIO has its buyers so does not rely on any buyer of cheap iron ore.

The iron ore price might shift higher and lift profits higher too.

[arja] 12/8/2016 09:42

hammeted today on tax increase on iron ore announced in OZ . Hopefully it will bounce later although it is a friday !

[robrah] 12/8/2016 09:33

say a month .

[christh] 12/8/2016 09:11

what is your timeframe?

[robrah] 12/8/2016 09:07

moving down nice . the chart says 23 quid soon

[christh] 12/8/2016 07:04

Robrah 11 Aug'16 - 09:59 - 802 of 802

good on you,Good luck to you, very brave,
I do not know how to hedge.Not enough knowledge on that.
Perhaps you can mentor me how to go about it as I am down big time.

I only read charts I go by what they tell me.
RIO is an uptrend and will head upwards to £31.

[arja] 11/8/2016 21:28

yes , day trading using intra day chart often pays off and much less risky than holding a stock overnight .

[jdb2005] 11/8/2016 15:42

Went Long this morning at 2448 & closed at 2478 = nice profit

[libertine] 11/8/2016 14:37

You can`t say they didn`t warn you!!


Dividends

In February 2016, the board announced a new dividend policy. At the end of each financial period, the board will determine an appropriate total level of ordinary dividend per share, taking into account the results for the financial year, the outlook for our major commodities, the board's view of the long-term growth prospects of the business and the Company's objective of maintaining a strong balance sheet. The board expects total cash returns to shareholders over the longer term to be in a range of 40 to 60 per cent of underlying earnings in aggregate through the cycle.

The board is committed to maintaining an appropriate balance between cash returns to shareholders and investment in the business, with the intention of maximising shareholder value.

Acknowledging the cyclical nature of the industry, in periods of strong earnings and cash generation, it is the board's intention to supplement the ordinary dividends with additional returns to shareholders.

For 2016 only, in transition to the new policy, the intention of the board is that the total full year dividend will be not less than 110 US cents per share, equivalent to $2 billion. The 2016 interim dividend has been determined at 45 US cents per share, equivalent to $809 million, in line with the intention that the balance between the interim and final dividend be weighted to the final.

Dividends are determined in US dollars. Rio Tinto plc dividends are declared and paid in pounds sterling and Rio Tinto Limited dividends are declared and paid in Australian dollars, converted at exchange rates applicable on 2 August 2016 (the latest practicable date prior to the declaration of the dividend).

[robrah] 11/8/2016 11:36

It was always coming but ppl choose follow broker rec which brokers use to offload their holdings