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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rio Tinto PLC4,592.50 GBP0.00Rating

About Author

Mark Taylor  is an equity analyst at Morningstar.