Today Rio Tinto Limited (ASX: RIO) released its half-year production results. CEO Sam Walsh said: "We achieved another half of very strong operating performance, powered by productivity gains across our business," and I agree.
Here are 10 key points you need to know about today's announcement.
- Global iron ore shipments were 23% higher than the previous corresponding period (pcp).
- Mined copper was 23% higher.
- Aluminium production was flat but bauxite production was 2% lower than the pcp.
- During the half, Rio's Pilbara iron ore operations achieved a 290 million tonne per annum (mtpa) run rate.
- Copper production from the Kennecott Utah Copper and Oyu Tolgoi projects was impressive.
- Development of the infrastructure for its Pilbara 360 expansion remains on track for completion within 12 months.
- Gold production was up strongly.
- Mozambique coal operations were affected by stoppages and operational changes.
- Coal production will be down but boast higher margins in 2014.
- Exploration and evaluation spend was $202 million lower than the pcp.
What it all means
Rio Tinto, along with BHP Billiton Limited (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) has been hammered by a wave of negative sentiment over the past six months as the iron ore price slumped from over $US135 per tonne to just $US91.80 per tonne last month.
However, with a strong operational performance from the copper division there is significant potential for Rio to post an upside surprise when it reports half-yearly results next month. In early afternoon trade, Rio shares were trading 1.24% higher as a result of the announcement.
To buy or not?
I'm impressed by today's results and production forecasts. However, lower iron ore prices will take a toll on Rio's revenues (counteracting the increased iron ore sales) and I think it would be wise for risk-averse investors to hold off buying shares until next month (when we can gauge its effect on profits when it announces half-yearly results). If Rio does not report any significant writeoffs, but continues to cut debt and possibly increase its dividend payout then it could appear cheap at today's prices.
3 high-risk/high-reward resources stocks