On Feb 21, we upgraded metal mining giant,
Rio Tinto Plc.
) to Neutral based on its improved prospects. Rio Tinto, which
focuses on the lucrative minerals market, was upgraded shortly
after reporting impressive production as well as revenue data for
full year 2012.
We downgraded Rio to Underperform on Jan 22. However, we are
upgrading our recommendation back to Neutral for the stock due to
an improvement in the production status of the company. Rio
reported improved year-over-year production for 2012 for some of
its products like iron ore, energy and aluminium.
The acquisition and divestiture strategies that Rio undertakes
are also proving beneficial for it. With the acquisitions of
Turquoise Hill Resources Ltd. as well as Richards Bay Minerals in
2012, Rio expects to benefit a great deal. Also, in December
2012, Rio sold off its stake in the Palabora Mining Company
Limited, to focus more on the productive areas.
Also, the company announced improvements in its cost structure
for 2012 with a target to achieve cost savings to the tune of
$5.0 billion by 2015. This will lead to a cost saving of $3.0
billion annually by 2014.
Moreover, the company also plans to reduce its capital
expenditure for 2013 to $13.0 billion from the $17.4 billion
spent in 2012. This reduction will help the company boost up the
free cash flow, thereby increasing the shareholder returns. In
view of the increased production of iron ore as well as a
recovery in the copper volumes, management also increased the
2012 dividend by 15% to $1.67 per share.
Other Stocks to Consider
Apart from Rio Tinto, other stocks in the mining sector that
are currently performing well include
Denison Mines Corp.
Commercial Metals Company
). All these companies carry a Zacks Rank #2 (Buy).
COMMERCIAL METL (CMC): Free Stock Analysis
DENISON MINES (DNN): Free Stock Analysis
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