Today Rio Tinto (RIO) posted its January Quarter (JQ) production results and all in all, they were good. With almost all key numbers / assets producing as per programmed.
We see 4 key areas in the result.
Iron ore was strong – this is a known known given the accuracy of shipping data these days. However, RIO shipped 88.5mt in the JQ and 168.8mt in 1H18. Annualised shipping rates indicate FY guidance of 330-340mt is very likely easily covered. RIO steered guidance to high end of range with JQ annualised at 354mt and 1H annualised at ~340mt.
Copper up as Escondida does more – production up sharply YoY and the QoQ. The trend continues to be positive here (expect more on this from BHP tomorrow)
Minerals sands segment slump – A range of safety and labour relations issues across the two sites in this business unit (South Africa and Canada) has seen guidance steered lower to “1.1 to 1.2 million tonnes (previously 1.1 to 1.3 million tonnes). This reflects the operational and labour disruptions encountered in the first half. Guidance may be further updated to reflect the ongoing disruptions mentioned above.” While mineral sands are but a small component of the business, this could be v’good for other mineral sands producers such as Iluka (ILU)
Bauxite exports up 10% on firm demand – an important area of focus for RIO with the AMRUN expansion project due to kick in next year – with a key target of export sales – so good news to see export sales up ~10% YoY citing “firm demand”. = Good for Alumina (AWC) as well
Rio Tinto (RIO) Chart
Market Matters Take/Outlook
While the JQ production numbers were inline with expectations, the recent strength in the sector renders us neutral/bearish in the short term, targeting a test of ~$74, or ~7% lower for Rio Tinto.
