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Gold/Mining/Energy : A to Z Junior Mining Research Site -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (3081)	1/31/2003 10:59:01 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

How many thousands of tonnes of gold will China need to buy to offset their inevitable future losses in US T Bills ?

To: Jim Willie CB who wrote (3081)	1/31/2003 12:15:37 PM
From: 4figureau	Read Replies (1) \| Respond to of 5423

Rio well placed for metals upturn By: Peter Gonnella Posted: 2003/01/30 Thu 15:47 ZE2 \| © Mineweb 1997-2003 PERTH – The world’s second largest miner, Rio Tinto [ASX:RIO], has singled out China as an emerging market powerhouse that could have a major bearing on global supply and demand balances in most commodities and a big say in driving their growth. “At a global level we remain of the view that economic recovery is going to be a slow process,” Rio chairman Sir Robert Wilson said today (Thursday). “The influence of China on our markets suggests, though, that the mining and metals industries might move ahead of other sectors.” While Rio achieved record cashflows in calendar 2002, a higher Aussie dollar against the greenback, inflation and depressed global industrial conditions conspired to subdue its profit result. It generated impressive cashflows totalling US$3.74 billion, a 10 percent lift on the previous year, as the benefits of a diversified suite of commodities across flexible, low-cost operations in tough times kicked in. Nevertheless adjusted earnings before non-cash extraordinary items fell eight percent to US$1.53 billion, but this performance still represented the global giant’s second best net income effort. Analysts’ consensus forecasts ranged between US$1.45 billion and US$1.55 billion. Group turnover rose four percent to US$10.82 billion and Rio maintained a strong shareholder return policy, declaring a final dividend payment of US$0.305/share, which took total CY dividends to US$0.60. Rio’s balance sheet also remained strong, with interest cover of 13 times. Net debt at year end stood at US$5.74 billion and its net debt to capital ratio improved one percent to 41.1 percent by 31 December. “This was a creditable performance given the economic environment in which we have been operating,” said Sir Robert. “Our focus on long life, highly efficient operations has produced a business that remains highly profitable and cash generative even in markets as difficult as we have seen in 2002.” The exceptional charges totalling US$879 million – involving predominantly writedowns pertaining to Kennecott Utah Copper and Iron Ore Company of Canada – dragged 2002 net earnings down to US$651 million or 40 percent below CY 2001. Rio CEO Leigh Clifford said the writedowns in the carrying values of these assets were necessary following the group’s revised assumptions about the future markets for these businesses, basically because of lower than expected prices. Consequently, the Kennecott impairment has climbed to above US$1 billion after the US$583 million write-off in 2001. JP Morgan analyst Richard Rossiter wasn’t shocked by the accounting provision as Kennecott and IOC had been underperforming. “While the writedowns were not flagged, they certainly came as no surprise given the deterioration in prices, particularly copper,” he said. Otherwise, the Sydney-based analyst felt Rio delivered a sound result. China Given the lacklustre outlook in Europe and Japan, Rio nominated China as the big hope for a recovery in commodity markets. “With little sign of any improvement in Europe or Japan, the performance of the US and Chinese economies in 2003 will be critical,” Wilson said. The Chinese economy is only about 12 percent the size of the US economy, and Rio is not suggesting the former can pull the world out of recession. “However, the same is not true in the mining and metals industries,” Rio’s knight pointed out. “China already consumes more steel and more copper than does the US.” In 2002 China’s demand for most commodities soared by 10 percent or more and doesn’t seem to be flattening out. “If it continues to grow at anything like its current rate, it will begin to place pressure on the industry to keep up with the level of demand,” Wilson prognosticated. That would position Rio nicely to take advantage of an upswing in demand through its competitive cost structure and high-margins assets. “In the current economic environment, this (the flexibility of our operations) enables us to manage our production in line with demand whilst limiting the impact on our cost base,” said CEO Clifford. “It means that we have the capacity to respond quickly as and when markets improve.” And demand growth usually culminates in price increases. Chinese demand for iron ore, for instance, is on a steep incline and is estimated to jump another 18-20 percent this year, according to Rio. “We are probably seeing the strongest market in iron ore that we have seen in the last decade, if not in the last 20 years,” Clifford said. “It certainly leads to the conclusion for a substantial price rise.” Rio’s shares finished virtually steady today (Thursday) at A$32.13 though it was difficult to gauge investor reaction to its financials as they were released after the market closed. Interestingly, Wilson told analysts and journalists during a conference call there weren’t any M&A deals brewing, pouring cold water on market speculation of a Rio bid for WMC Resources [ASX:WMR]. “We have got expansion opportunities in virtually every single one of our commodity groups,” he said, pointing to a phase of organic growth after an aggressive US$5.5 billion M&A blitzkrieg over the past 3-4 years. That’s not to say Rio won’t pounce on WMCR if the assets of the recently created spin-off of the old WMC are deemed to offer good value. mips1.net