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Rio Tinto Plc, Trading Update – 17 July 2014

 

Contrary to the expectations of many investors, Rio Tinto announced a positive performance across a number of production areas during its H1 Operations Review. In detail, management declared a 10% increase in group iron ore production in tandem with a 20% increase in shipments, translating into a net reduction of inventories for the period.

In addition to the positive performance in the iron ore division, copper production also increased by 23% as efficiency improvements at Oyu Tolgoi and Kennecott Utah helped to offset the impact of output lost from divested operations. The group also completed the sale of its interest in the Clermont thermal coal mine for a consideration in excess of $1 billion during the period.

Further from here, cost savings made in 2013 from exploration and evaluation cuts were sustained throughout H1, with the total YTD figure coming in at $340 million. This leaves the group comfortably on target to see expenditure in this regard capped at $1 billion for the year.

On the downside, bauxite and titanium dioxide production were slightly lower when compared with the same period a year ago, as management adjusted production to reflect demand in the underlying markets.

Nevertheless, management’s efforts to mould the group into a more efficient and streamlined business are continuing to pay off, with further production improvements over the period complementing cost savings achieved through restructuring. This bodes well for earnings at Rio Tinto and should help to support the group’s shares over the medium term.

At present, we maintain our pre-existing price target at 3,800.00 pence per share for Rio and continue to hold a positive outlook for the group.

The next major event for the shares is the release of H1 financial results on 07 August 2014. Accordingly, we shall review both results as well as our price target for the shares at this time.

Rio Tinto Share Price Hourly Intervals

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