Rio Tinto Limited Update

Submitted by Craig Strzelecki on 20 April, 2007 - 18:14

Rio Tinto Limited has a maintained Buy recommendation and a $94 share price target from sharemarket analyst Citigroup Investment Research. 1Q07 production was broadly OK and showed volume growth year-on-year, but was adversely affected by seasonal weather and maintenance, and was generally weaker than the previous quarter. The analyst thinks that the mining company well setup for a solid year of volume growth across its commodity suite. 1Q07 Production was generally in-line with the analyst's estimates, but affected by the well flagged weather related issues in iron ore and uranium, port congestion issues at Newcastle, and a severe snow storm at Kennecott Energy. There were also a number of scheduled major shut downs and the impact of an ongoing strike at IOC. Rio Tinto delivered iron ore volume growth of 12% yoy. Aluminium production rose 2% compared to the first quarter of 2006. Hard coking coal increased by 28% compared to the first quarter of 2006, and was coupled with improved market conditions

Meanwhile, sharemarket analyst UBS has a Buy 2 recommendation and a $97 share price target for Rio Tinto. The company had released their March Quarterly production and the analyst had the following observations: The March quarter on the whole was below their expectations. While there was nothing materially wrong, the soft quarter reflected weather issues in iron ore, port congestion in coal, and planned and unplanned maintenance in aluminium and copper. Also lower grades and recoveries impacted copper particularly at Bingham Canyon. The result is likely to mean earnings downgrades of c. 2-3%. The analyst has yet to review their earnings forecasts but they suspect there could be downgrades following the quarterly report. They also note the fact that the market is yet to adjust for A$ strength (every US1c move in A$ impacts NPAT by US$37m). RIO represents value at 9.5x 08 EPS, in their view: the outlook for commodities remains strong (perversely these production shortfalls only exacerbate the tightness in the markets and support prices); and as a result Rio Tinto's current trading multiples appear cheap. Key benchmark commodities have firmed over the past month suggesting that fundamentals remain strong. Their valuation is $78.47 based on DCF 10% d.r., while their price target is based on 11x 07e EPS.

Rio Tinto Limited is listed on the Australian Stock Exchange (ASX) under stock code RIO. You can view their investor website here. The company was listed on the ASX on 1 January, 1970. Leigh Clifford is the CEO and Paul Skinner is the Chairman for this mining resources company. Rio Tinto is a leading international mining group, combining Rio Tinto plc, a London listed public company headquartered in the UK, and Rio Tinto Limited, which is listed on the Australian Stock Exchange, with executive offices in Melbourne. The two companies are joined in a "dual listed companies" (DLC) structure as a single economic entity, called the Rio Tinto Group. The Group finds, mines and processes the earth's mineral resources - metals and minerals essential for making thousands of everyday products that meet society's needs and contribute to improved living standards. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade RIO. Check your charts and good luck with your share trading!

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