Financial Trading Blog
Stock of the day 16/01/2015 – Rio Tinto PLC
This release precedes Rio Tinto’s full year earnings in February, and will likely reflect the issues that have plagued the commodities markets. After the company recovered some of its 2013 losses by the end of that year, shares began 2014 at £34.09, quickly reaching their peak in late February at a price of £36.42. However, sliding iron prices say Rio Tinto head into a decline in the second half of the year, culminating in shares sinking to £26.00 by mid-December. Rio Tinto rallied slightly at the end of the year, and started 2015 at £30.11. However, copper dropped to 6 year lows in the New Year, hampering Rio’s progress and causing a slip to £28.56.
Oil set the tone for commodities in the second half of 2014, but it wasn’t alone. Iron ore rapidly fell off in 2014, and much like oil had its forecasts slashed to below $60 for 2015. This is serious news for Rio Tinto, as iron ore makes up 90% of the company’s production. Combine this with copper’s struggles, and things don’t look good for Rio Tinto key resources.
And despite pledging to increase cash returns to shareholders back in November, analysts are expecting earnings per share to shrink 11.6% this year and 18.5% in 2016. On top of this comes the news today that now-defunct mining services company Forge Group are claiming Rio Tinto owe them $150 million after controversial measures taken after the former’s collapse.
Rio Tinto is trying to muscle into other areas, and is seeking permission to build a $500 million diamond project in India due to the strength of the luxury commodity; the company is also looking at selling Australian uranium to India in the next few years. However, in the short term Rio Tinto will be wary as the commodity markets continue to conspire to make life difficult for those connected to the natural resources.
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