Eadwig
02 Sep 2017
Coal & Iron RIO says it completed the sale of Coal & Allied in Australia to China's Yancoal for A$3.5B (US$2.69Bn), and adjusts its guidance for 2017 thermal coal production.With all Hunter Valley coal operations transferring to Yancoal, RIO revised guidance for 2017 thermal coal production to 13M-14M tonnes (17M-18M tonnes previously).Speculation about what RIO will do with the sale proceeds is inevitable. Debt repayment plus some more money for shareholders are the two most likely uses for the money, several commentators think. Special div or buyback, I wonder?Perhaps more importantly, RIO has now opened the Silvergrass iron ore mine in W. Australia, which will add another 10M tonnes to annual production capacity.
Eadwig
02 Sep 2017
Re: Results LKH, "I meant a metaphorical "trading" package rather than literally shovelling in the coal down the hatch on top of the iron ore!"I managed to edit out a bit that showed I understood what you meant. Yes, there may be room for an overall package, with the advantage that the customer only has one supplier to deal with which might make a premium price viable. Especially if it could be put in place for a number of years ahead. The problem there is that you're going to end up fixing a price, and that can go badly wrong, as Glencore found out last year with coal.I've often wondered why the Chinese don't do their smelting within Australia. Seems daft digging up the ore and the coal there and then shipping it to China. Their companies are certainly not above shipping out thousands of workers to mining camps in the middle of nowhere as they have done in African countries, and it would help their apparent ferocious drive towards cutting pollution within China.There may be objections from the Shanghai metal markets being cut out of the loop too. Or other interests at work.Presumably its easier to get a deal in Africa for such projects, whereas Australia is geared up to supply the workforce and wherewithal to build any required infrastructure - and to exact the appropriate taxes/royalties.I'm sure we'd see deals being done if both sides felt there were synergies to be had.
LK Hyman
02 Sep 2017
Re: Results Eadwig,I meant a metaphorical "trading" package rather than literally shovelling in the coal down the hatch on top of the iron ore!It may well be that coking coal is such a widely available commodity that there's no particular advantage for the Chinese in buying it and iron ore from the same supplier. Equally it may be that having a knowledge of the properties of both coking coal and of iron ore gives RIO the ability to tailor the supply and quality of both minerals in a way that gives them some advantage vis a vis other companies which only supply the one or the other but not both.LKH on the flybridge
Eadwig
01 Sep 2017
Re: Results LKH, I can't immediately think of any synergies. I doubt they'd be transported together, except maybe as part of the same train within China. If they shift coal by train in China. I've seen plenty of it on the rivers, but apart from one overnight sleeper, when I was sick anyway, I've never been on the Chinese railways to take note.There's a reason you don't mix iron ore with other stuff on bulk carriers too, but I can't drag it from the back of my brain at the moment. You'll probably know more about that than me anyway. (and travelling on Chinese rivers, come to that!)
LK Hyman
31 Aug 2017
Re: Results Eadwig,"I'd personally rather they got rid of coal completely"I'd like them to get out of thermal coal completely but to keep the coking coal. There must be synergies with the iron ore boys if RIO can flog the Chinees an a package of iron ore and coal to turn the former into steel, no?LKH on the flybridge thinkin' outta the box
Eadwig
31 Aug 2017
Re: Results Games, "Offloading the coal assets seems like a reasonable long term decision, unlike Glencore's trading ethos to buy more in the short to medium term."Those coal assets are right next door to GLEN's existing assets, so they will gain economies of scale one assumes. GLEN have immediately started to look for a buyer for another, more isolated, Australian coal asset, so you can see the thinking.I'd personally rather they got rid of coal completely, but if you have to have it, you may as well get your cost base down and profitability up (before flogging the whole operation to the Chinese or Indians, most probably).
LK Hyman
31 Aug 2017
Re: Grasberg Eadwig,I understand that Freeport has agreed to build a smelter at the site within the next five years. Other than that I'm not aware of any restrictions on output on the part of the Indo guvmint, though God knows what the little guys may try to do once they're sitting at the big table.One suspects that, once they are 51% equity owners, their interests will be pretty neatly aligned with those of Freeport and RIO which should be good news. It was good to see that Freeport has clearly retained full operational control over the operation so fingers crossed everything goes smoothly from here on in.LKH on the flybridge
Eadwig
31 Aug 2017
Re: Grasberg As LKH reported above, FCX has announced that it has reached an agreement with Indonesia on the Grasberg Mine.The Grasberg Mine is by some measures the largest gold mine in the world and the second largest copper mine. The mine saw violent protests after Freeport laid off workers related to lengthy permit disputes with the government, and has seen output suffer.Under the new agreement, Freeport, in an effort to get production going again, has given up its majority stake in the mine to Indonesia, and has agreed to be a 49% owner with the government.RIO is also entitled to 40% of the output from the mine above certain levels until 2021, and then it is entitled to 40% of all the output following 2021.RIO is expected to agree the deal since this will allow Freeport to apply for (and almost certainly be granted) a ten-year permit extension, replacing a 6 month temp. permit which was due to expire in October, and replacing certainty in this major Cu production resource.I haven't heard that RIO have officially done this, but its perhaps significant that in the last 24 hours Jeffries and Macquarie have both reiterated BUYs on RIO with significant target price rises @4200p and @4500p respectively. Then again, it is that time of year for analyst updates, and you wouldn't expect downgrades on RIO as the markets stand.LKH (or anyone else) do you know if the Indonesian government is still demanding all output goes to their own refineries, of will Freeport (and RIO eventually) be allowed to seek full market prices out in the big wide world?
LK Hyman
30 Aug 2017
Grasberg The press reports that Freeport McMoRan has agreed to let the Indonesian government up its stake in Grasberg from 9% to 51%.That should be good for RIO, albeit its interest will be diluted.I'm not sure how much value Mr Market attributes to RIO's stake in Grasberg ... I suspect almost nothing as the main benefits for RIO will not come about until 2021.LKH on the flybridge
Eadwig
25 Aug 2017
Al taking off now Aluminium prices rise near 6 year highs, the latest commodity to enjoy a boost from China’s efforts to cut working hours and supply in an effort to curb pollution.Al futures in Shanghai jumped as much as 3.2% to the equivalent of nearly $2,500/metric ton, joining strong rallies in prices for iron ore and zinc.J.P. Morgan analysts forecast aluminium prices will rise another $100/ton in Q4, "well supported by collective realization that supply reform is a reality, despite Chinese aluminium inventories more than quadrupling so far this year... However, these higher prices will probably prompt smelters outside of China to initiate restarts, pushing the global market into a surplus."
daverob82
23 Aug 2017
Re: Versus BHP RBC analysis following BHP update: RBC Capital Markets analyst Paul Hissey reckons the result underscores the case for an investment in rival Rio Tinto (RIO.AU) (RIO):BHP's FY17 result was a little stronger than our estimates on underlying earnings; however, it feels like the outlook is overall softer for both costs and capex. The dividend, which was softer than our forecast, falls short compared to the strong shareholder returns announced recently by RIO and FMG. Also of interest, was a formal declaration that the US Onshore division is 'non-core' and the company is 'actively' looking to exit (whilst sentiment may have arrived at this point, we believe this is the first time the company has formally declared a complete exit is on the cards) - this is likely to appease domestic investors, although at this point the financial outcome remains uncertain. We continue to favour RIO over BHP, with a stronger balance sheet, clear strategy on the growth pipeline and stronger (demonstrated) potential for capital returns to shareholders.
LK Hyman
22 Aug 2017
Re: Versus BHP Picstloup,"massively outperforming BHP recently"I much prefer RIO to BHP. Both have had major clusterfucks in the past (RIO with Alcan, Mozambique coal, and Canadian Uranium) but BHP's seem somehow more egregious (Samarco, US shale and Jansen), especially since RIO has clearly learned the lessons from Alcan.RIO's greater exposure to high quality iron ore (unlike Fortescue, for example, whose iron ore is rubbish quality) makes it a FAR better bet than BHP, my humble. LKH on the flybridge
picstloup
22 Aug 2017
Versus BHP Very glad I topped here up on 21 Jan 2016 (about as close as I've ever got to calling the low). Not many things produce a 100% + return in under two years (Treatt and Renishaw in my case).Also massively outperforming BHP recently.
LK Hyman
14 Aug 2017
Re: Results Games,"Wasn't there some Israeli bloke who was keen on that neck of the woods? Beny someone or other? Sounded a bit of a wide boy but maybe he'd take it off RIO's hands if the price was right."Ah, I see that Beny has just been arrested by the Israelites, so perhaps Jean Sebastien will have to look elsewhere for someone to take Simandou off of his hands.I think, if I were him, I'd just walk away from Simandou and hand the entire clusterfuck over to the Guinea lads and let them do as they please with the project.The Pilbara is the place to dig up iron ore, not Guinea ffs. There's all the iron ore you could want in the Pilbara, it costs next to nothing to dig it up, and it's only a stone's throw to China where all the demand is.Simples.LKH on the flybridge
Rhigos
11 Aug 2017
Re: Div, correction to previous post Just read my post and realised that in my haste had missed out the odd word. Here is version that hopefully makes more sense:Mostly progressive, but slightly erratic dividend, is one reason to buy but if the SP does not rise overall return is liable to be negative. The growth prospects according to forecasts however are excellent:GROWTHTurnover 24.1%EBIT 109%Pre-tax profit 105%Normalised EPS 88.9%Now that RIO and other miners have stopped spending most of their cash and worse borrowing to expand production facilities and capacity by organic growth as well as acquisitions. Now concentrating on improving efficiency, cutting costs and returning cash to investors via dividends and more dubiously share buy backs I think mining shares now deserve a better rating.GCL +2.5% bit at end reads OK to me.
