Shares in mining giant Rio Tinto (RIO) have performed well for me ever since I realised back in October here that ‘investors should focus on China not cultural heritage’. Actually if truth is told, it is more than just China because demand for the iron ore, copper and aluminium exporter is centred on a broader changing world. Or as Rio Tinto put it on a chart in its second quarter numbers a few days ago, ‘we produce materials essentially for a low-carbon future’.
Back in August here, I observed that mining giant Rio Tinto (RIO) had been silly not to square off the various interest groups being a big mining group means you rub up against. I did also observe that 'the trajectory of the Rio Tinto share price remains centred fully on the demand levels or not from China for iron ore...for all the ESG excitement this situation will induce, that is the cold hard reality'.
So naughty old Rio Tinto (RIO) then. The iron ore, copper and coal name has fessed up that it was naughty in blowing up some ancient rockshelters at Juukan Gorge 'and have unreservedly apologised to the Puutu Kunti Kurrama and Pinikura people'. After, scrapping some executive bonuses, ponying up A$50 million to 'attract, develop and retain Indigenous professionals into our company', as well as giving such groups 'a greater voice' in its decision-making process and stating although it 'cannot change the past...we are absolutely committed to doing better in the future', right on Rio Tinto, yes?...
Shares in blue-chip mining giant Rio Tinto (RIO) have not been immune from the stockmarket carnage that falling commodity prices have inflicted on the whole mining sector, though at £19.85, down from a 12-month high of £32.37, they have fared much better than many of their weaker brethren. It is my second share tip of the year for 2016.
John Meyer of SP Angel this morning comments on Anglo Pacific (APF), Connemara Mining (CON) and Rio Tinto (RIO) as well as offering a detailed macro view on the news that is shaping global mining and the AIM mining pond.
Over the weekend, I identified BHP Billiton (BLT) and Rio Tinto (RIO) as two of the top dividend payers in the FTSE100. Based on Friday’s close BHP’s yield was 7.28% and Rio’s 6.19%. Following on from analysis last week about the fundamental reasons for buying BHP (HERE and HERE), this morning both companies announced director purchases. Taken in isolation these purchases might not seem like much to write home about, but in the context of investment planets aligning they could be significant.
John Meyer of SP Angel this morning comments on Randgold Resources (RRS) & Rio Tinto (RIO) as well as offering a detailed macro view on the news that is shaping global mining and the AIM mining pond.
John Meyer of SP Angel this morning comments on Anglo Pacific (APF), Anglo American (AAL), Rio Tinto (RIO) and ZincOx Resources (ZOX) as well as offering a detailed macro view on the news that is shaping global mining and the AIM mining pond.
When it comes to commodities, much of the focus has been on the drops in the prices of oil and gold, but iron ore has performed even worse. The price of iron has more than halved in the past year, dropping to around $50 per ton and trading close to a ten year low – although it has just put in its biggest gain since October 2012, having risen by 5.9% yesterday to a price of around $54.
Over the last five years it has generally been profitable to pick up Rio Tinto (RIO) shares – or RTZ as we old farts still refer to them as - at 3000p and below because as the share price graph shows, this has been the point when the investor risk reward ratio has been more heavily weighted towards reward than risk. Moreover, on a year’s chart the share price seems to be well supported; take a peek.
In my last note on Rio Tinto (RIO) in late July, I finished with an observation that the shares looked attractive on a 4% annual dividend yield and an expectation that the company’s cash flow is likely to improve now that its Australian super efficient iron ore estate at Pilbara is about to come fully on stream. This is after some pretty massive capital investment in its infrastructure. I note that there is increasing talk of the company’s cash prospects and a growing preoccupation with what the company is likely to do with such cash, as and when it starts to flow from better operating margins and cuts in the capital expenditure that produced them. One phrase used in a paper of a decidedly pink hew (I speak of its appearance not its politics or life style inclination) that caught my attention was a reference to Pilbara as the “iron ore cash machine”.
As a generalist watcher of shares and their performance, I am often intimidated by the intimate and esoteric knowledge of experts; particularly in the mining sector. They seem to understand, or at least explain, every nook cranny of company performance in exquisite technology speak. However, as always in life, particularly in share spotting - that very unpredictable business - there are alternatives. My own approach as a generalist contrarian, with an eye on the fundamentals, as well as the technical analysis, is the combination of pedestrian observation and hopefully common sense evaluation; that has certainly been a helpful approach in the case of RTZ (RI0).
Looking through my notes, I was bullish on the prospects of Rio Tinto (RIO) over much of the last year, when the talk was dominated about an oversupply of iron ore. Given that this commodity provides 80% of Rio’s group earnings, why was I obtuse enough to like this share?
While smaller examples of the mining sector, and especially gold stocks, have been flying around all over the place of late (as if to make life as uncomfortable as possible for the hot money trying to call the floor in this asset class), Rio Tinto (RIO) has been more sedate than most.
Although I am probably joining a bit of small crowd in suggesting that Rio Tinto (RIO), or RTZ as old buffers like me still call it, is an addition to share buying lists, I can at least claim that I made it a buy at 2,780p last June and - rather less heroically - a hold at 3,010p last August after the interims. However, I can offer my reasons for doing so.
I like to think of myself in religio-investment terms, as a ‘contrarian, value oriented fundamentalist’ - or ‘CVOF’. In my opinion, it has merits when it comes to seeking personal salvation and stock picking. It was that which prompted me to propose Rio Tinto (RIO) ordinary shares in mid June at 2780p when - and because- other men’s (I use the word inclusively to include women) thoughts and words were filled with ‘China fear’.
Today Rio Tinto (RIO) is re-testing a previous support line dating back to October 2011. The most striking feature on the chart is the underperformance relative to the FTSE 100.
Mining shares have had a torrid time during the last year with a downward momentum against the FTSE100 index taken on thrust during the last three months. However, just as shares to do not keep going up forever, neither do they for most of their lives keep on going down forever, even if it does sometime feel like that.
There are not too many times when darting and hovering investor is able to by Rio Tinto (RIO) at an historic dividend yield that close to that of the FTSE 100 Index. I note that that the dividend yield on the FTSE 100 index last seen was 3.55% and the historic dividend yield on RTZ was an attractive looking 3.5%. At a share price of 3,176p its ordinary shares are back to levels last seen three years ago and well below the price of above 4,500p it reached in 2011. Clearly a closer look is suggested.
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