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Rio Tinto offers long term growth for investors as iron ore production remains strong

20th January 2015 Print

Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.

“Q4 production numbers were roughly in-line with expectations with production of its key commodity, iron ore, up by 12 % compared to the same quarter in 2013 with full year production at 295.4 Mt. These gains lead the company to set another record production level for iron ore as it seeks to become the lowest cost producer and maintain market share versus its competitors. Other commodities saw mixed production levels, copper production for the final quarter was down 23%, but up 4% for the year as a whole, while bauxite was down 3% for the year. Coal production was also down.

“These production figures are on the whole encouraging in terms of how well run Rio’s operations are, however the declining commodities environment, particularly iron ore is of concern and will only lead to lower earnings. All the major miners are intent or being a low cost producer and this will not help the cause for higher iron ore prices.

“Despite this, Rio Tinto remains a solid operation with good cash flows and an attractive dividend. It will be of interest to value investors who are expecting good long term growth in China and a recovering global economy.”