Rio Tinto held a briefing for investors in London.
Overall, the comments were upbeat about the company and the long-term outlook with no new capex approvals in the near term.
Rio Tinto, CEO Tom Albanese said that the company would not approve any new major capital expenditure in the near term.
The company expects that 2013 capex will taper off from the $16 billion in capex for 2012. The company said it would give an update on capex at its briefing next month but indicatively in the chart it suggests a $2–3 billion lower number for 2013 and a similar step down in 2014 numbers.
On the markets, the company appears cautious near term with minimal flow through in physical demand from announced stimulus packages. The company expects demand to flow through post the regime change in China. The company remains upbeat on the long-term outlook, especially for global steel demand.
We retain a fair value on the company at $90 and view this as a buy at the current price of $56.
We are cautious as we expect to see the market pull back and as expect that RIO may get back in the low fifty-dollar range. The recent strength in the market has not seen RIO hit new highs unlike the banking sector.
RIO pays little in the way of a dividend, as such is not suitable for those looking to earn a yield to offset falling interest rates. It is more for the long-term growth portfolio however given the risk of the sector and the small dividend it is better suited to the more aggressive investor.
For more information on RIO please contact us on 07 4771 4577.