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Rio Tinto Clamps Down in Australia

Gary Sattler — Thu, 06 May 2010 12:00:00 EST

Filed under: Industry, Competitive Strategy, Rio Tinto plc ADS (RIO), Politics, Commodities

A mining tax proposal in Australia, dubbed the Resource Super Profit Tax (RSPT), has caused the mining company Rio Tinto (RTP) to put some projects on hold. According to a report from Bloomberg, "Rio has plans to suspend an A$11 billion ($10 billion) expansion of its iron ore operations in Western Australia."

What does this mean to the company's investors? Really, not much. This move represents no fundamental change to Rio Tinto. It's merely a change in schedule. The item of concern here is the proposed tax itself. Bloomberg states: "The tax may reduce Rio's earnings by 21 percent and earnings at Melbourne-based BHP by 17 percent in 2013, according to UBS AG estimates."

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Rio Tinto Clamps Down in Australia originally appeared on BloggingStocks on Thu, 06 May 2010 12:00:00 EST. Please see our terms for use of feeds.

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Newmont is still mining the right commodities

Joseph Lazzaro — Tue, 29 Sep 2009 09:00:00 EST

Filed under: Newmont Mining (NEM), Stocks to Buy

Newmont Mining's (NYSE: NEM) stock continues to meander, despite an average, higher price for gold so far in 2009. The primary culprit? An average, lower price for copper.

Still, with a likely FY2009 revenue gain of 6-7%, I'm Reiterating my Buy rating for the company, first recommended on June 3, 2009 at a price of $46.42.

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Newmont is still mining the right commodities originally appeared on BloggingStocks on Tue, 29 Sep 2009 09:00:00 EST. Please see our terms for use of feeds.

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Freeport suspends dividend, cuts production on lower demand, prices

Joseph Lazzaro — Wed, 03 Dec 2008 08:58:00 EST

Filed under: Freep't McMoRan Copper (FCX), Commodities, Recession

Just call it another data point confirming the breadth and depth of the global economic slowdown. Freeport-McMoRan Wednesday suspended its dividend and cut production by 5% in 2009 and 11% in 2010, due to a sharp decline in prices, the company announced (pdf).

Freeport said it will reduce capital spending by $1.2 billion, a gargantuan 50% reduction from its previous estimate for 2009 capital spending. The company also suspended its $2 annual dividend.

Shares of Freeport (NYSE: FCX) Tuesday closed up 91 cents to $21.82 amid a broader market rally, but are declining $4.02, or over 18%, in premarket trading (8:27 am).

For the cutbacks, Freeport cited a large decrease in key commodity prices stemming from declining demand. Copper prices have declined to an average price of $1.69 per pound in November, compared to a nine-month average of $3.61 per pound as of September. Molybdenum prices have decline to $9 per pound as of December, compared to about $30 per pound in mid-October.

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Freeport suspends dividend, cuts production on lower demand, prices originally appeared on BloggingStocks on Wed, 03 Dec 2008 08:58:00 EST. Please see our terms for use of feeds.

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Freeport is a top-tier miner

Joseph Lazzaro — Thu, 03 Apr 2008 14:06:00 EST

Filed under: Freep't McMoRan Copper (FCX), Commodities, Stocks to Buy

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and a competitive advantage in established markets, preferably with a favorable global trend as a support. And with this in mind, Freeport-McMoran is worth a review.

Globally-oriented miner Freeport-McMoran (NYSE: FCX) is the world's second-largest copper producer and a major miner of gold and molybdenum. Further, FCX's purchase of Phelps Dodge in 2007 means that it has proven and probable reserves of: copper, 75 billion pounds; gold, 128 million ounces; and molybdenum, 1.9 billion pounds, net minority interests.

But perhaps most important, Freeport is one of only eight companies that have the economies of scale to compete in the global mining sector of the early 21st century. Look for continued merger/acquisition talk in the sector, but don't think of Freeport as an acquisition play: FCX has a large portion of the global copper market, geographical diversification, and enduring relationships with key customers, among other strengths, to continue to perform well in the years ahead. The Reuters F2008/F2009 EPS consensus estimates for FCX are $10.07/$11.07.

Further FCX's p/e of 12 is reasonable given its advantageous market position and prospects for growth. Don't expect Freeport's ascent to be perfect and calm, given its dependence on commodity prices, but that does not blot-out the secular trends that point to good things for FCX's in the years ahead.

The risks? Freeport's copper segment would be hurt by a global economic downturn.

The First Call mean rating for FCX is: Buy [19 firms]. Mean 2008 target: $117.00 [high: $135, low: $65.00].

Stock Analysis: Freeport is a moderate-risk stock not suitable for low-risk investors. Investors should expect above-average volatility with FCX. Don't buy FCX if your portfolio already contains a mining/mineral component. Investors with an investment horizon longer than two years should be rewarded from FCX's shares. Sell / Stop Loss if you were to buy shares in this company: $68.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Freeport is a top-tier miner originally appeared on BloggingStocks on Thu, 03 Apr 2008 14:06:00 EST. Please see our terms for use of feeds.

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Agnico-Eagle Mines proves there's gold where it's cold

Joseph Lazzaro — Wed, 12 Mar 2008 09:00:00 EST

Filed under: Canada, Commodities, Stocks to Buy

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models which have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Agnico-Eagle Mines is worth a look.

Agnico-Eagle Mines (NYSE: AEM) is a Canada-based gold producer with mining operations located in northwestern Quebec, mine construction projects in northwestern Quebec and northern Finland, and exploration and development activities in Canada, Finland, northern Mexico and the western United States.

Analysts like the fact that Agnico produces about 270,000 ounces of gold annually, and has about five million ounces of gold in proved and provable reserves.

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Agnico-Eagle Mines proves there's gold where it's cold originally appeared on BloggingStocks on Wed, 12 Mar 2008 09:00:00 EST. Please see our terms for use of feeds.

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Rio Tinto's value seen enhanced by high-price gold mine sale

Joseph Lazzaro — Fri, 22 Feb 2008 15:35:00 EST

Filed under: Alcoa Inc (AA), Barrick Gold (ABX), BHP Billiton Ltd ADR (BHP), Rio Tinto plc ADS (RIO), Freep't McMoRan Copper (FCX)

Rio Tinto's above-consensus sale price for its gold mine to Barrick Gold almost certainly increases Rio's negotiating stance vis-a-vis takeover bids from BHP Billiton or from other potential suitors, an analyst told BloggingStocks Friday.

"Rio's sale of its gold mine to Barrick for $1.7 billion when the market was expecting something like $570-$700 million is a fundamental data point the market cannot ignore," independent stock analyst C. Leonard Bauer said Friday. "It will force BHP Billiton and others receptive to a deal to redo their fair-value projections for Rio."

Rio (NYSE: RTP) has twice rejected hostile buyout offers from BHP Billiton (NYSE: BHP), the last for $147.4 billion, involving at least 3.4 BHP shares for each Rio share, arguing that the bids substantially undervalue Rio. Rio gained 64 cents to $452.89 while BHP gained $1.01 to $72.89 in Friday afternoon trading.

At first glance, the idea of bidding wars for targets appears to be a paradox in the current economic environment. After all, the U.S. economy is barely inching along, and the credit markets can be described, at best, as being cautious regarding potential deals. But the mining sector is another story, Bauer said. Strong economic growth in emerging markets has created surging demand for raw materials, minerals, and commodities. Further, the sector is in the midst of mergers and expansions that will produce miners with global market capabilities.

Iron ore war?

The above demand, particularly from Asia, Bauer said, has offset recent, modest quarterly earnings performance from some miners, and has driven up the value of miners like Rio and Freeport McMoRan (NYSE: FC).

In addition, China's size and its economic development plan has further increased miners' value. China, which with Alcoa (NYSE: AA) earlier this year jointly purchased a 9% stake in Rio Tinto through its Chinalco aluminum company, has said it will continue to seek acquisitions of foreign companies, including mining companies, Bauer said. Bauer added that he does not have a rating on any mining company nor own their shares.

"China may ultimately try to outbid BHP because a BHP / Rio union would unite two of the three largest suppliers of iron ore, which China needs for its economy," Bauer said. "A BHP / Rio union would likely leave China in a weaker negotiating position regarding iron ore prices. So you can see why Rio feels BHP's offers so far have not valued the company fairly. Rio knows that as long as China grows, it has a commodity likely to increase in value substantially for years to come. And that's a good place to be in, from a corporate standpoint."

Rio Tinto's value seen enhanced by high-price gold mine sale originally appeared on BloggingStocks on Fri, 22 Feb 2008 15:35:00 EST. Please see our terms for use of feeds.

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Alcoa, Chinalco 12% interest in Rio Tinto seen as savvy move for both stakeholders

Joseph Lazzaro — Fri, 01 Feb 2008 18:24:00 EST

Filed under: Other Issues, Deals, BHP Billiton Ltd ADR (BHP), Commodities

Alcoa and Aluminum Corp. of China, known as Chinalco, have jointly acquired a 12% stake in Rio Tinto, Alcoa announced Friday, in a statement.

The deal is estimated to be worth $14.05 billion, and represents the largest overseas investment by a Chinese company, Chinalco said. Alcoa Inc. (NYSE: AA) said it would contribute $1.2 billion to the investment.

Alcoa's shares closed Friday up $1.19 to $34.15 on the news, as did Rio Tinto plc (ADR) (NYSE: RTP), which closed up $34.05 to $441.00.

Alcoa and Chinalco's stake could very well obstruct a bid from Anglo-Australian mining giant BHP Billiton for Rio Tinto, the Associated Press reported. BHP Billiton Limited (ADR) (NYSE: BHP) closed up $6.15 to $73.73.

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