20th Jul 2016 10:55
LONDON (Alliance News) - UBS said the first-half production update released by Rio Tinto on Tuesday was "broadly in line" with the Swiss bank's estimates, with the exception of copper and gold, retaining a Buy recommendation on the stock.
Rio will need to increase iron ore shipments in the second half of 2016 in order to meets its targets, but the multi-commodity miner managed to deliver production results that broadly met its expectations in the first half. Rio reiterated its guidance for the year but said it will be subject to weather conditions.
The Pilbara operation in Australia that produces the miner's iron ore from a network of 15 world-class mines reported a 10% lift in production in the first half of the year to 160.8 million tonnes, with production rising 1.0% in the second quarter from the first.
UBS analyst Myles Allsop highlighted Rio is meeting targets thus far in 2016 in all of its businesses, though UBS said the miner's gold and copper production figures were slightly below the bank's expectations. This was, the analyst said, due to a lower contribution from the Oyu Tolgoi mine in Mongolia.
Rio Tinto said mined gold production in Oyu Tolgoi for the first half was 71.4 thousand ounces, with production expected to be lower in the second half of 2016. Rio Tinto said copper production at the Oyu Tolgoi mine was 23% higher in the recent half-year compared to the first half of 2015, "due to higher grades and throughput". However, copper production slid by 10% from the first quarter to the second quarter, "principally attributable to lower grades".
Rio's total mined copper production in the first half experienced just a 1.0% lift year-on-year to 282.3 million tonnes, as production remained flat between the first and second quarters.
Following the production update, UBS kept a Buy stance on the Rio Tinto shares, alongside a price target of 2,900 pence.
"We believe Rio is well positioned in the current commodity price environment, as it has long-life and low-cost assets which are well invested, as well as a strong balance sheet," said UBS's Allsop.
Shares in Rio Tinto were down 1.6% at 2,339.00p Wednesday, adding to the 3.3% drop seen on Tuesday.
By Daniel Ruiz; [email protected]
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