Rio Tinto plc (RIO), one of the world's largest iron ore producers, recently predicted that the world mining industry would need to produce at least another 100 million metric tons of the steelmaking commodity per year over the next eight years to satisfy demand growth projections of the world.
Increase in demand is attributable to the rapid urbanization and industrialization of the developing countries including China, India, Indonesia, Vietnam and countries in Africa and South America. Studies have shown that the emerging markets comprise 75% of the global iron ore demand and 90% of the Chinese demand.
Such a staggering rise in demand is anticipated to be covered largely in the early years by doubling the global iron ore production among the major miners, including Rio Tinto. The company banks on its $1.5 billion Simandou iron ore joint venture with China's Chinalco in Guinea.
The joint venture targets initial production of 70 million tonnes per year from the Simandou mine, with an estimated future output to reach up to 170 million tonnes. Rio also gave ambitious time frame for the first shipment of iron ore by mid-2015
Rio Tinto is also geared up to expand its iron ore production capacity in Western Australia to 333 million tonnes per year in Pilbara region by 2015 from the current 225 million. Rio has planned to invest close to US$15 billion for boosting its output in the region
Riorecently recorded earnings per ADR of $3.87, up from $2.97 recorded in the previous year fuelled by favorable worldwide market condition, strong Asian demand as well as rise in prices of metals and minerals.
Headquartered in London, UK, Rio Tinto is engaged in exploring, mining and processing of the earth's mineral resources, producing a broad range of metals and minerals. Rio Tinto competes against global mining giants like BHP Billiton Ltd. (BHP) and Vale S.A (VALE).
We currently have a Neutral recommendation on the stock. Rio Tinto has a Zacks #3 Rank, which implies a short-term (1-3 months) Hold rating.
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