Rio Tinto, Joy Global give bullish metals forecasts
By Steve Goldstein, MarketWatch
Last update: 8:07 a.m. EDT May 29, 2008
marketwatch.com
LONDON (MarketWatch) -- Rio Tinto and Joy Global on Thursday both gave bullish prospects for the mining industry, with both industrials firms saying they stand to benefit from ravenous demand from China, India and elsewhere.
Rio Tinto (RTP:498.30, +5.12, +1.0%) (UK:RIO: news, chart, profile) (AU:RIO: news, chart, profile) , making comments at a London investor presentation, highlighted its iron ore and nickel projects as it seeks to rebuff a takeover bid from BHP Billiton.
"Demand growth remains strong and, combined with supply-side constraints, this means there has never been a time at which our options for expansion have been so valuable. With world demand for our products set to double by 2022, we have the reserves and resources in place to keep pace with the market," said Chief Executive Tom Albanese. See external link to Rio Tinto presentation.
Urbanization drives steel-consumption growth faster than GDP, the company noted in slides accompanying the presentation. It expects steel consumption in China to grow 12.2% per capita per year through 2015, ahead of the 8.5% growth estimates from the country.
Joy Global (JOYG:77.88, +2.19, +2.9%) meanwhile upped its sales and earnings guidance for the year.
"The company continues to benefit from unprecedented demand for its underground and surface mining equipment in response to the strong demand for coal, copper, iron ore and oil sands. All of these major commodity markets that the Company serves have extremely thin supply surpluses, or most often, significant supply deficits, as commodity supply increases to date have been unable to match commodity demand growth," the Milwaukee mining equipment company said.
Joy Global raised its sales guidance to a range of $3.3 billion to $3.4 billion, compared to its prior view of $3.1 billion to $3.3 billion. It also said it expects an annual profit of $3.15 to $3.30 a share. Joy Global Inc. said that its second-quarter net income fell to $72.1 million or 66 cents a share, from $77.6 million, or 70 cents a share, a year earlier. The latest results include 20 cents a share in charges. On average, analysts polled by FactSet Research expected earnings of 75 cents a share.
Rio touts projects
Rio Tinto talked up projects from Guinea to Arizona that will provide it with iron ore and nickel to satiate metals demand.
The mining group said at an investor presentation in London that world demand for its metals and minerals will double by 2022. Rio Tinto's compound annual production growth is expected to be 8.6% through to 2015.
Rio noted several new projects, including Simandou in Guinea with 2.25 billion metric tons of iron ore, La Granja in Peru with 2.8 billion metric tons of inferred copper resources, and Resolution in Arizona with 1.3 billion metric tons of copper and molybdenum resources. Rio Tinto sees a pipeline of greenfield opportunities including nickel in Minnesota, coking coal in Mongolia and western Canada, diamonds in India, potash in Saskatchewan and lithium in Serbia.
BHP Billiton (BHP:88.60, +0.58, +0.7%) (UK:BLT: news, chart, profile) (AU:BHP: news, chart, profile) has offered 3.4 of its shares for each Rio share, an offer Rio Tinto has consistently rebuffed.
In mid-day London trade, Rio Tinto shares rose 1.2%, part of a 71% advance over 12 months.
BHP Billiton shares rose 0.8% as part of a 63.8% advance over 12 months.
That said, Rio Tinto stopped trading at a premium to the BHP offer in March, and its discount to the bid has steadily grown, both as the Rio board presents its defense and also as competition concerns are sounded from Brussels to Beijing. End of Story
Steve Goldstein is MarketWatch's London bureau chief. |
