(Minews) - Rio Tinto, London’s largest listed mining company, has turned the ship around under new boss Sam Walsh.
Following a year of aggressive cost cutting and reduced spending on new mining projects, Rio has turned last year’s record loss into a $3.7 billion profit, while posting record output of iron ore, bauxite and thermal coal.
The mining giant generates 89% of its earnings from iron ore, 7% from copper and 4% from diamonds and other minerals.
Iron ore production hit a forecast busting record of 266 million tonnes in 2013 and management expect that to increase to 290 million tonnes by the middle of this year, with a target of 330 million by 2015.
Sam Walsh said: “These strong results reflect the progress we are making to transform our business and demonstrate how we are fulfilling our commitments to improve performance and strengthen the balance sheet.”
Concerns about slowing Chinese economic growth coupled with geo-political developments in Crimea has seen the price of commodities deteriorate, with iron ore suffering its largest one-day fall in more than four years last week.
The key steelmaking ingredient slumped from nearly $140 a tonne in December to as low as $104.7 just over a week ago, before bouncing back and stabilising at around $110.
Rio now trades on 8.2x this year’s forecast earnings, falling to 7.4x next year, which is a discount to global peers, while a growing 4% yield should support the shares. If production targets continue to be hit and iron ore prices remain resilient, the shares could prove an interesting bet.
