What You Need to Know about Rio Tinto’s Q1 Review

It’s been a tough few weeks for iron ore miners.


Look no further than the volatility of iron ore. At the start of 2017, if you told me iron ore price was going to plummet more than 30% in fewer than two months, I would have thought you were crazy.

But after reaching a high of US$94.86 on 21 February, iron ore ripped down, trading below US$64 a tonne.

So, has the commodity finally hit its bottom?

According to Metal Bulletin:

‘..the spot price for benchmark 62% fines rose by 2.22% to $64.60 a tonne, trimming its loss so far this week to only 5.94%. It’s now down 31.9% from February 21, and has fallen 18.1% year to date.

It’s good news for miners like Rio Tinto Ltd [ASX:RIO], which traded up as much as 25 cents this morning, to $59.17 per share.

You’d think a rise in the iron ore price, which has been hard to come by lately, would see Rio rise by more than 25 cents. And, ordinarily, you might be right. However, Rio’s operational review may have disappointed some investors.

What happened to Rio Tinto?

This morning, Rio released their first quarter operations review.

Production levels for copper, coking coal and iron ore all fell. Copper production fell by as much as 37%. According to Rio, a 43-day labour strike at Escondida, combined with restricting production at Grasberg, was the cause of the dip.

The miner has also slashed their FY17 copper guidance from 525–665,000 tonnes to 500–550,000 tonnes.

According to the Australian Financial Review:

Rio had set a very wide guidance range for copper production in 2017, in a bid to reflect the uncertainties attached to its complicated share of production from Indonesia’s Grasberg mine.

But it seems the guidance wasn’t wide enough.

What now for RIO shares?

Rio’s latest results should cause you to sell your holdings. Uncertainty about price and shipment dates is part of investing in a company like Rio or BHP Billiton Ltd [ASX:BHP].

But you likely won’t double your money on giants like Rio or BHP in 2017. If these are the kinds of returns your looking for this year, you might want to cast your eye over resource specialist Jason Stevenson’s free report, ‘The Top 10 Australian Mining Stocks for 2017’.

Jason will introduce you to 10 cheap, top-quality Aussie mining stocks that look set to soar this year.

To get your free copy of Jason’s report, click here.


Härje Ronngard,

Junior Analyst, Markets and Money

Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.

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