Stock cheat sheet: Rio Tinto

Here’s a quick look at Australia’s biggest iron ore miner.

In the Australian resources sector, they don’t come much bigger than Rio Tinto (ASX: RIO). In fact by market capitalisation, only BHP Billiton (ASX: BHP) is bigger.

Rio has 66,000 employees and operations right throughout the world. Here are some of its key results from 2013:

Consolidated Revenue $US 51.1 billion
Debt $US 18.1 billion
Capex $US 12.9 billion
Cash and Cash Equivalents $US 10.2 billion
Cash Flow $US 20.1 billion
Underlying Earnings $US 10.2 billion
Net Profit $US 3.66 billion

Source: Rio Tinto Annual Report 2013

Although it is known as a diversified miner, the groups most lucrative and important operations are those found in the Pilbara, Western Australia. Its iron ore operations in the Pilbara produce high quality low cost iron ore.

Despite a small contribution from the company’s Iron Ore of Canada business, a majority (over 94%) of the 266 million tonnes of ore the miner produced in FY13 came from two major Pilbara business units, namely Hamersley Iron and Robe River.

The iron ore division accounted for over 90% of the company’s FY13 underlying earnings and China is its number one customer. Across all commodities, China makes up approximately 35.4% of all revenues.

The miners’ Aluminium division is the second largest grossing business unit. In FY13 it sold $12.46 billion of bauxite, alumina and aluminium combined. In recent years the aluminium division has suffered heavy write downs on the back of a falling aluminium spot price. However, thanks to significant cost cutting and divestments, the division produced underlying earnings of $US557 million in FY13 – up from only $US54 million a year before.

Rio’s second largest business unit by profit is Copper. It is the industry’s 6th largest copper producer, netting approximately $US821 million in earnings last year. As iron ore production ramps up and prices begin to fall, it is a likely growth area for Rio moving forward. Although revenue dropped slightly in the past year (thanks to a wall slide and lower spot prices), investors can expect the Copper division to perform strongly for a number of years.

Lastly, the Energy and Diamonds divisions continue to lag their larger counterparts and have been unable to avoid the headwinds facing a number of key commodities they produce, including uranium and coal. Combined, the underlying earnings for these two businesses was just $US383 million.

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