2 Iron Ore Miners – Rio Tinto and BHP Billiton

Rio Tinto Ltd

 
RIO Details

Third Quarter Production Results: Rio Tinto Ltd (ASX: RIO) in the September 2017 quarter has posted 6% increase in Pilbara iron ore shipments to 85.8 million tonnes (100 per cent basis) over Q3 2016, due to the improved rail capacity and performance while the group has downgraded its copper guidance for the second time this year. In the third quarter 2017, the bauxite production was 12.9 million tonnes, which is 4% higher than the third quarter of 2016, due to the strong performances at Gove and Weipa. Bauxite production guidance has been revised to between 50 and 51 million tonnes (previously 48 to 50 million tonnes). The mined copper production was 3% lower than the corresponding quarter of 2016 due to the lower copper head grades at Rio Tinto Kennecott and Oyu Tolgoi. The mined copper guidance for full year has been cut to between 460 and 480 thousand tonnes (previously 500 to 550 thousand tonnes) after the third quarter impact of the delayed ramp-up of the Escondida expansion, and fourth quarter mine sequencing changes at Rio Tinto Kennecott. Titanium dioxide slag production grew by 23% compared to the third quarter of 2016, due to the higher market demand. Moreover, RIO has completed the sale of Coal & Allied to Yancoal Australia for a total consideration of $2.69 billion.
 
Third quarter production results (Source: Company Reports)
 
Additionally, the company has announced a new $2.5 billion share buy-back, which is comprised of a A$700 million (approximately $560 million) off-market buy-back tender in RIO shares, and on-market purchases of Rio Tinto plc shares. Meanwhile, RIO stock has risen 21.6% in six months as on October 16, 2017. However, the stock performance is majorly subject to iron ore price volatility. We maintain our “Sell” recommendation on the stock at the current price of $ 71.46

 
RIO Daily Chart (Source: Thomson Reuters)

BHP Billiton Ltd

 
BHP Details
 
Making efforts for future: BHP Billiton Ltd (ASX: BHP) has been tracking well with respect to activities for future. Its Olympic Dam site trip has been scheduled for November and the same is expected to throw more insights on operations. BHP might also consider some outside direct sales and asset swaps for future growth. The group’s total direct economic contribution for FY17 was US$26.1 billion, which included the payments to suppliers, wages and employee benefits, dividends, taxes and royalties, and US$72.9 million voluntarily invested in social projects across the host communities. The major projects that are in pipeline includes the Mad Dog Phase 2 project, which has the potential capacity to produce up to 140,000 gross barrels of crude oil per day. In the first 10 years of operation, the incremental production from the Spence Growth Option is expected to be approximately 185 ktpa of payable copper in concentrate and 4 ktpa of payable molybdenum, and the first production is scheduled for the FY21. The group is also continuing to investigate one of the best undeveloped potash resources in the world in Jansen in Canada. Moreover, the company recently had positive drilling results at Wildling in the US Gulf of Mexico after the discovery of oil in multiple horizons.
 
BHP had reported for FY17 attributable profit of US$5.9 billion and the underlying EBITDA of US$20.3 billion, which was up 64%. There were additional productivity gains of US$1.3 billion in FY 17 and 4% reduction in unit costs. The Coal IROC operational, autonomous blast hole drills and full truck automation at Jimblebar is expected by end of CY17. On the other hand, BHP Billiton Finance (USA) Limited (the Company), a wholly-owned subsidiary of BHP Billiton Limited, has announced the final pricing of the Tender Offers as part of its global multi-currency bond repurchase plan. BHP will spend up to US$1,000,000,000 aggregate purchase price (excluding accrued and unpaid interest) in the Tender Offers (the Offer Cap). Since the Offer Cap has been reached, BHP does not expect to accept for purchase any Notes tendered after the Early Tender date. Meanwhile, BHP stock has risen 12.67% in six months as on October 16, 2017. Based on the foregoing, trading scenario and commodity price (iron ore and oil particularly) volatility, we give a “Hold” recommendation on the stock at the current price of $ 27.31

 
BHP Daily Chart (Source: Thomson Reuters)

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