China smelter group agrees to lower Q1 copper charges
The charges tend to fall when ore supply declines and rise when more concentrate is available.
Investment bank Goldman Sachs on Tuesday downgraded Rio Tinto (NYSE: RIO) from ‘neutral’ to ‘conviction sell’ citing the world’s number two miner’s over-reliance on iron ore for its earnings.
The bank is concerned about the fact that 90% of Rio Tinto’s pre-tax profits came from the steelmaking ingredient in 2012 and sees “significant earnings declines if the company goes ahead with the Pilbara 360 project in a declining iron ore price environment.”
Rio Tinto is in the process of expanding production in the Pilbara region of Australia with a target of 290 million tonnes of annualized production by the end of the third quarter.
The London-based company is also in talks to sell its 58% holding in privately-held Iron Ore Company of Canada which it hopes will raise as much as $2 billion.
Rio Tinto’s ADRs suffered a 4.9% fall in heavy volumes in New York, dragging down the whole sector.
World number one iron ore miner Brazil’s Vale dropped 2.6%, while number three producer BHP Billiton declined 3%.
North American iron ore and coking coal miner Cliffs Natural Resources plummeted 6.6% after Goldman maintained a sell rating on the stock.
Year to date market value losses of the miners make grim reading: Rio Tinto and Vale are both down 19% in 2013, BHP is off 15% and Cliffs shareholders are nursing a 47% decline this year.
Rio Tinto is not the only company expanding production and with so much new supply coming on stream most observers predict a decline in iron ore prices in the medium term.
The benchmark CFR import price of 62% iron ore fines at China’s Tianjin declined slightly to $134.40 on Tuesday, but is still up over 50% since hitting three-year lows in September.
