Relative to peers in the space, Rands said she still favours Rio Tinto, because of the changes it has implemented and its focus on “value over volume.”
“Rio Tinto is our largest holding in the mining space. We are attracted to their high-quality asset base, their low cost of production and strong balance sheet. We like their focus on value over volume, so maximising cashflow at the same time as growing the business. Rio seems best placed to deliver the most attractive cash returns to shareholders, given their financial strength. In addition to operational risks, there are of course risks which are out of Rio’s control; macro and commodity price movements. Rio are especially exposed to iron ore, relative to the other large listed miners.”
Hargreaves Lansdown senior analyst Laith Khalaf said the miner’s “self-help measures” have helped steer the group in the right direction.
“All the dials seem to be moving in the right direction at Rio, mainly thanks to the self-help measures implemented by the company. Mining companies are price-takers, and have no control over commodity markets, but Rio has made ground by cutting cash costs and scaling back the dividend.
“After a ruthless cut last year, the dividend now looks to be back on track, and the final payment announced today is way higher than expected. The fact that Rio has also decided to return capital to investors via a share purchase plan, as well as ramping up its capital expenditure, suggests the company is pretty bullish about its prospects going forward.”
