Strong set of production numbers
Rio Tinto (RIO) reported a solid set of production numbers for the third quarter of 2015 on October 15. The output of all the key commodities is mostly in line with market expectations.
Iron ore production was almost in line with market expectations. The company also maintained its production guidance of 340 million tons for 2015. Copper production was weak. It fell by 14% quarter-over-quarter, but it was also in line with market expectations. Aluminum production was a little lower than market estimates due to slower ramp-up at Rio’s Kitimat smelter. Coal production was broadly in line with market expectations.
Year-to-date, iron ore mining companies have fallen considerably. RIO has been the most resilient among the iron ore names. Its stock has fallen 8.5% compared to 10.1%, 39%, and 57.7% declines for BHP Billiton (BHP)(BBL), Vale SA (VALE), and Cliffs Natural Resources (CLF), respectively. CLF forms 3.4% of the SPDR S&P Metals and Mining ETF (XME). Rio Tinto forms 1.8% of the SPDR S&P Global Natural resources ETF (GNR).
In this series, we’ll discuss Rio Tinto’s third quarter 2015 production numbers for various commodities. We’ll also look at the management team’s outlook on the business.
Rio Tinto overview
Rio Tinto is a British-Australian multinational metals and mining corporation. It’s headquartered in the United Kingdom. It has a dual-listing structure. It includes Rio Tinto PLC—a London- and NYSE-listed company. Rio Tinto’s major products are aluminum, copper, diamonds, gold, industrial metals, iron ore, thermal and metallurgical coal, and uranium. The company is structured into five product segments:
- Diamonds & Minerals
- Iron Ore
More than 50% of Rio Tinto’s revenue comes from iron ore. Iron ore’s contribution to the company’s underlying earnings is close to 70%. We’ll discuss the production performance of these divisions in detail later in this series.