Rio Tinto (RIO) announced its production totals for the last quarter of 2015 this morning and while its up 11% over the year, its been an underwhelming response from analysts and the market.
From ABC:
Australia’s second biggest miner by market value produced 87.2 million metric tonnes of iron ore in the December quarter, and said iron ore production in 2016 is expected to be around 350 million tonnes.
The result just fell short of average analyst expectations of 91 million metric tonnes according to Bloomberg.
“Against a challenging backdrop for the industry, Rio Tinto remains focused on operating and commercial excellence to leverage the low-cost position,” said chief executive Sam Walsh in a statement released to the stock exchange.
“In 2015, we delivered efficient production, meeting our targets across all of our major products, while rigorously controlling our cost base.
“We will continue to focus on disciplined management of costs and capital to maximise cash flow generation throughout 2016.”
Rio Tinto said its global iron ore production was in line its 2015 full-year guidance of some 340 million tonnes.
Its Pilbara operations produced 309.9 million tonnes in 2015, the bulk of Rio’s production, and a 10 per cent increase on 2014.
JPMorgan have cut their price forecasts savagely for the sector this morning, with BHP down to $13 per share (from $16) and Rio Tinto down to $36 per share from a high of $60, citing the company “no longer offers compelling value for long term investors”.
You don’t say…
With no signs of reducing supply into a global glut, and iron ore earnings down nearly 50% to just over $USD4 billion, its going to take more than cost cuts and pay freezes for the miner to look healthy for investors on any timeframe.
Although Bloomberg are out saying that Rio will reduce its growth targets for 2016, with only 6% more iron ore to be dug out.