Iron Ore Continues to Dominate Rio's Portfolio

Rio Tinto's Q2 results show ongoing improvement from severe rain impact in Q1, with dominant iron ore segment recording volume growth

Mark Taylor 15 July, 2011 | 10:20AM
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As we've propounded in more recent research, it has become debatable whether Rio Tinto (RIO) is a diversified major, or an iron ore major with copper and aluminium interests. Iron ore volumes and pricing have grown at pace, while copper and aluminium volumes stagnated. Copper prices have grown strongly, though. Strong iron ore prices and growth are like manna from heaven while other segments flail, particularly with recent nearly unprecedented weather interruptions causing havoc.

Overall, second-quarter 2011 volumes showed ongoing improvement for Rio from those severe first-quarter rain impacts, though some port and rail constraints remain. The trend for iron ore to dominate the company's portfolio continues, with the segment one of the few to record volume growth versus normalised quarterly levels in the second quarter.

Iron, copper and aluminium account for more than 90% of Rio's profit, in the case of iron ore, 65% alone. We make no change to valuation or our overall view on Rio.

Read the full analysis of Rio Tinto’s 2Q results. Analyst notes as well as Morningstar’s Equity Research Report for Rio Tinto, including investment thesis, valuation, financial health and stewardship for the company are available to Premium subscribers.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Rio Tinto PLC Registered Shares4,924.50 GBX0.06Rating

About Author

Mark Taylor  is an equity analyst at Morningstar.

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