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Rio Tinto's Unique Place in the Volatile Commodity Market

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Rio Tinto's Unique Place in the Volatile Commodity Market PART 1 OF 7

Behind Rio’s Tinto’s Stock Outlook after a 52-Week High

Rio Tinto riding 52-week highs

Rio Tinto’s (RIO) stock hit a new 52-week high of $47.85 on August 7, 2017. It previously hit a 52-week high on July 31, 2017, of $47.38.

Mining stock prices have been buoyant lately, backed by the strength of iron ore prices. Rio’s performance YTD (year-to-date) has been quite strong, despite the continued volatility in commodity prices. As of August 8, 2017, Rio’s stock has gained 23% YTD, compared with BHP Billiton’s (BHP) gain of 16%. Vale SA (VALE) has outperformed both with a YTD gain of 34%.

Behind Rio’s Tinto’s Stock Outlook after a 52-Week High

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Shareholders returns

Rio released its 1H17 earnings on August 2, 2017. While its 1H17 underlying earnings of $3.9 billion were 152% higher YoY (year-over-year), these came in slightly below the market’s expectations.

Rio also declared cash returns of $3.0 billion to shareholders. This will include an interim dividend of $1.10 per share and an increase in share buybacks in its London listing shares of $1 billion. Rio had already announced a $500-million buyback earlier this year.

Rio also reduced its net debt by another $2.0 billion in 1H17. Its balance sheet is now among the strongest in the sector (XME) (GNR). Its financial leverage is lower than that of BHP Billiton (BHP), Vale SA (VALE), and Freeport McMoran (FCX).

In this series

In this series, we’ll analyze recent developments for Rio Tinto, discuss the performance and outlook of its divisions, and analyze its latest results in an attempt to see where it lies in relation to its vision and its peers. We’ll also discuss how the company is positioned to navigate the volatile commodity market.

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