Rio Tinto plc Sponsored ADR
Other Metals/Minerals
Rio emerges as the one mining company worth the trade
Key arguments supporting the idea
- High production performance outshines that of competitors
- Expansion projects underway, including one of the largest iron ore mining
operations
- M&A opportunities due to restructuring of competitors BHP and Anglo
American
Investment thesis
Rio emerges as the only mining company, with all the competitors struggling to
keep up with production challenges. The reporting season in the metals sector
has started, and this year's leaders are now more clearly visible on the investment
map. Almost all iron ore producers (Vale, Rio, BHP) are planning production at the
upper end of the range. The aggregate production capacity of the three largest
MMCs will amount to about 890 million tons of iron ore by the end of the year,
which is equivalent to almost 35% of the market share. At the same time, many
companies are thinking about reorganization of their structures. This year,
AngloAmerican and BHP have thought about selling off their assets. The only
company that will keep its production assets will be Rio Tinto. The company may
emerge victorious from the race for the most demanded metals (nickel, copper,
cobalt).
Iron ore prices are expected to remain above the established support of $100
this year. Iron ore prices have fallen by almost 30% since the beginning of the year
due to rising inventories at ports, shrinking margins of steel mills and slow
resumption of construction activity in China. The metal rebounded after some
banks raised their growth forecasts for China's economy following better-thanexpected economic data on exports and factory activity. But the price could fall
lower as early as next year on rising supply from West Africa.
The world's largest untapped high-grade Simandou ore deposit in West Africa is
expected to start production in 2025 and reach annual capacity of 60 million tons
a year within 30 months, RIO said. The oversupply in the global offshore market is
expected to have a negative impact on ore prices and reduce the profitability of
production, which will particularly affect the company's competitors, despite Rio's
ability to offset the price drop by increasing production.
We recommend buying the dip in the RIO stock, which coincides with the dip in
the iron ore market
Rio emerges as the one mining company worth the trade
Key arguments supporting the idea
- High production performance outshines that of competitors
- Expansion projects underway, including one of the largest iron ore mining
operations
- M&A opportunities due to restructuring of competitors BHP and Anglo
American
Investment thesis
Rio emerges as the only mining company, with all the competitors struggling to
keep up with production challenges. The reporting season in the metals sector
has started, and this year's leaders are now more clearly visible on the investment
map. Almost all iron ore producers (Vale, Rio, BHP) are planning production at the
upper end of the range. The aggregate production capacity of the three largest
MMCs will amount to about 890 million tons of iron ore by the end of the year,
which is equivalent to almost 35% of the market share. At the same time, many
companies are thinking about reorganization of their structures. This year,
AngloAmerican and BHP have thought about selling off their assets. The only
company that will keep its production assets will be Rio Tinto. The company may
emerge victorious from the race for the most demanded metals (nickel, copper,
cobalt).
Iron ore prices are expected to remain above the established support of $100
this year. Iron ore prices have fallen by almost 30% since the beginning of the year
due to rising inventories at ports, shrinking margins of steel mills and slow
resumption of construction activity in China. The metal rebounded after some
banks raised their growth forecasts for China's economy following better-thanexpected economic data on exports and factory activity. But the price could fall
lower as early as next year on rising supply from West Africa.
The world's largest untapped high-grade Simandou ore deposit in West Africa is
expected to start production in 2025 and reach annual capacity of 60 million tons
a year within 30 months, RIO said. The oversupply in the global offshore market is
expected to have a negative impact on ore prices and reduce the profitability of
production, which will particularly affect the company's competitors, despite Rio's
ability to offset the price drop by increasing production.
We recommend buying the dip in the RIO stock, which coincides with the dip in
the iron ore market
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