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].
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Junior Analyst, Markets and Money
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