Steel Guru
Rio Tinto not receiving recognition for copper and aluminum - Investec
Edited by : AL CIRCLE
2 min read
According to broker Investec, diversified FTSE100 miner Rio Tinto is not receiving recognition for its copper and aluminum divisions.
Mr Mark Heyhoe analyst said that "With the market focused on short term earnings, we do not believe Rio is receiving recognition for its copper and aluminum divisions and is trading at a substantial discount to underlying value."
The broker retains a buy rating for the stock but has reduced its target price to 4045 pence where previously, it was 4170 pence.
The analyst said that following last week’s investor seminar in Sydney, Australia, the broker had downgraded its 2011 and 2012 full year earnings estimate by 4.4% and 6% respectively. This largely reflects lower earnings in the aluminum division which we now expect to break even in 2H11E.
As well as the aluminum division, the changes to Investec's valuation stem from an increase in depreciation charges for ERA for 2011 estimates onwards after ERA reduced its reserves at Ranger from 29.8 kilo tonne to 16 kilo tonne as reserves were reclassified and grades adjusted shortening the mine life.
Exploration and evaluation costs in the H2 were increased by USD 460 million mainly for Resolution, Simandou and the Mozambique coal projects.
Mr Heyhoe said that as a result Investec has reduced its full year 2011 estimate for attributable profit by USD 729 million to USD 15,491 or USD 8.15 per share. For 2012, the same estimate is downgraded to USD 900 million to USD 14,375 million or USD 7.72per share.
Mr Mark Heyhoe analyst said that "With the market focused on short term earnings, we do not believe Rio is receiving recognition for its copper and aluminum divisions and is trading at a substantial discount to underlying value."
The broker retains a buy rating for the stock but has reduced its target price to 4045 pence where previously, it was 4170 pence.
The analyst said that following last week’s investor seminar in Sydney, Australia, the broker had downgraded its 2011 and 2012 full year earnings estimate by 4.4% and 6% respectively. This largely reflects lower earnings in the aluminum division which we now expect to break even in 2H11E.
As well as the aluminum division, the changes to Investec's valuation stem from an increase in depreciation charges for ERA for 2011 estimates onwards after ERA reduced its reserves at Ranger from 29.8 kilo tonne to 16 kilo tonne as reserves were reclassified and grades adjusted shortening the mine life.
Exploration and evaluation costs in the H2 were increased by USD 460 million mainly for Resolution, Simandou and the Mozambique coal projects.
Mr Heyhoe said that as a result Investec has reduced its full year 2011 estimate for attributable profit by USD 729 million to USD 15,491 or USD 8.15 per share. For 2012, the same estimate is downgraded to USD 900 million to USD 14,375 million or USD 7.72per share.
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