RIO – 1H17 Earnings

Posted on | by Leon Hinde | Leave a Comment on RIO – 1H17 Earnings

RIO reported 1H17 underlying earnings of US$3.9bn, which was largely in line with market  expectations. EBITDA of US$9.0bn was also in line.

Lower capex resulted in cash flow and net debt coming in slightly better than exceptions (gearing now 13%)  with net debt end of June US$7.6bn. 

Buy-back was boosted by US$1.0bn increase, helping to offset a softer interim dividend. The interim dividend announced was US$1.10 and assumes 50% payout ratio.

In 2018 we expect RIO to see flat earnings growth at best, and we have the stock trading  on a forward yield of 4.5%.

Chart – RIO

 

 

 

 

RIO – $3bn Share Buy-Back

Posted on | by Leon Hinde | Leave a Comment on RIO – $3bn Share Buy-Back

RIO has confirmed that Yancoal remains the preferred bidder of Coal & Allied post a revised and improved offer from Yancoal yesterday.

We expect material free cash-flow (FCF) to be passed through to shareholders despite iron ore falling from its February peak.  In FY18, RIO could return up to $3billion  through share buy-backs.

We remain cautious on the outlook for spot iron ore prices. However, the low levels of debt, low cost of production and aggressive capital management undertaking by RIO will help to provide share price support.

FMG, RIO & BHP will likely see a minor rally from the current oversold conditions,  before turning lower.

Chart – RIO

Iron Ore Slips Below $60.00

Posted on | by Todd | Leave a Comment on Iron Ore Slips Below $60.00

Spot prices of Iron Ore fell again overnight  dropping to a fresh seven-month low. The 62% grade was down over 2.5% to close at $57.02 per ton.

During the month of May, Iron Ore dropped over 17%, extending its decline from the multi-year high of $95.00 last traded in February.

Mining names BHP, RIO and FMG are all under pressure in early trade losing more than 1% each.

FMG has reached an eight-month low of $4.70. We see the next downside targets on Rio and BHP at $59.50 and $22.50, respectfully.

Rio Tinto

BHP

Fortescue Metals

 

BHP And RIO Trade Lower As Iron Ore Continues To Unravel

Posted on | by Todd | Leave a Comment on BHP And RIO Trade Lower As Iron Ore Continues To Unravel

The Spot Iron Ore price continued to trade lower overnight, losing 4.6% to reach a 6-month low of $63.20 per dry tonne. This is a 33.5% drop from the high of $95.00 last traded on February 21st.

It’s worth noting that the sharp selloff is picking up pace just weeks away from the delivery of the Australian Federal Budget.

Since Iron Ore remains the country’s single biggest export, Federal revenue projections are highly sensitive to the outlook for Iron Ore prices.

Both RIO and BHP have traded lower on the open,  reaching new 5-month lows of $57.60 and $23.30, respectively.

Unless Iron Ore stages a dramatic rebound, we look for the the next key support level in RIO at $56.20, and at $22.60 for BHP. 


 

RIO Pressured Lower On Falls In Copper & Iron Ore

Posted on | by Todd | Leave a Comment on RIO Pressured Lower On Falls In Copper & Iron Ore

Shares of RIO Tinto have opened over 2% lower as both Iron Ore and Copper prices fell sharply in overnight trade.

Iron Ore prices seem to be in free fall, suffering an 8.5% drop to $68.00 per tonne. This is the largest overnight fall in over a year and extends the losses since February to over 28%.

Copper prices fell over 5% to $2.54 per pound in NY trade. This is a new 5-month low and technical indicators are pointing lower.

Rio shares are currently at $59.50. We see a key support area at $58.40, and would suggest a break of that level would extend materially to the downside.

Rio Tinto

Resources – Stop-Loss Required

Posted on | by Leon Hinde | Leave a Comment on Resources – Stop-Loss Required

Although many resource names have enjoyed a strong rally over the past 12 months, there’s reason to be cautious.

To protect capital we recommend investors holding resource names, run tight stop-losses below the recent lows.

Overall, investors should be reviewing their portfolio allocations, tilting to defensive names and ensuring access to effective portfolio hedging and shorting strategies are in place.

Chart – FMG
Chart – RIO

 

 

 

Iron Ore Gets Hammered

Posted on | by Todd | Leave a Comment on Iron Ore Gets Hammered

With the financial media focused primarily on the US missile strike in Syria, many investors didn’t notice the 7% drop in Iron Ore prices on Friday.

The spot price of Iron Ore fell $5.50 to $75.45 yesterday. This is over 20% lower than the February 21st closing price of $95.00.

Making matters worse, the September contract for Iron Ore on the Dalian exchange also closed 7% lower after trading down to its 8% limit for most of the session.

The sharp fall in Iron Ore will have its biggest impact on BHP, RIO and the Aussie Dollar.

The AUD/USD closed the New York session at a 1-month low of .7495. This is the first close below .7500 since early January and opens up the next support level at .7425.

Investors who would like to profit from a lower AUD/USD can look at the BetaShare YANK Exchange traded Fund. This is an inverse fun which gains value as the AUD/USD falls.

Call in for more details about YANK and the other ETFs that we cover.

Chart – YANK

RIO and BHP Are Close To Support

Posted on | by Todd | Leave a Comment on RIO and BHP Are Close To Support

The share prices of  RIO and BHP are both approaching key support levels which could create investment opportunities.

The are both trading below their 30-day moving averages but are close to support $58.80 and $23.50, respectfully.

The attached charts show that these support line have held and became good buying levels for a move higher over the last six months.

However, we are mindful of the importance of exports to China for both of these companies. Overnight, China’s five largest banks reported earnings which showed steady results but increases in the  percentage of non-performing loans tied to real estate.

It’s worth noting that Chins’a top five banks are considered the largest in the world in terms of assets. A sharp contraction in any of those five could trigger weakness in RIO and BHP

Chart – BHP
Chart – RIO

 

BHP & RIO – Where is Support

Posted on | by Leon Hinde | Leave a Comment on BHP & RIO – Where is Support

Our Algo Engine has triggered multiple buy signals across the major resource names, both in metals and in energy.

With the peak to trough sell-off among the sector extending between 13% – 20% it’s likely we find some value investors stepping back in to the market.

We’re comfortable with select exposure in BHP, RIO, S32, WPL, OSH, ORG but caution investors that stop-losses below the recent lows will be a prudent way of managing risks.

It seems unlikely that any buying interest from this level will carry the above names to new near-term highs. We’re of the view that a corrective bounce will top out at 5 – 7% above recent lows

We see the recent volatility in oil and iron ore, being primarily driven by US Dollar swings rather than related to any fundamental factors and remain cautious of negative news flow from China’s unsustainable debt problem within their shadow banking industry.

Chart – BHP
Chart – RIO