Resilient Rio to Rebound

By Kenneth Robson on January 28, 2013 • ( 0 )

Rio makes a lower high

Corrected (rotated to fix horizon, then cropped) version of another image. Shows the Ranger Uranium Mine in Kakadu National Park, east of Darwin, Australia. (Photo credit: Wikipedia)

Dampier, Western Australia salt fields. (Photo credit: Wikipedia)

RIO TINTO (‘Red River’)

Company Assets

Contrary to what one would think, the share price of RIO rallied after announcing a massive $14 billion dollar write-down, including $3 billion on the Madagascar coal mining venture.

This rally did not imply that the market was happy with this dismal outcome but at least this accounting measure “clears the slate” for future profits with experienced Sam Walsh at the helm.

The outlook for iron ore remains encouraging, and there are plans to increase Pilbara production by 50% to 353 million tonnes in the next few years.
Alcan’s Weipa operations have increased bauxite production by 12.5% to a record 23.3 million tonnes in 2012.
RIO has three diamond mines and is the world’s largest producer of coloured diamonds at the East Kimberly Argyle mine.
Globally the demand for the quality coal RIO produces in Australia and the US will continue for the present, thermal coal for electricity generation, and coking coal for steel production.
With the Ranger mine, RIO supplies roughly 14% of the world’s uranium.
RIO has a substantial Australian copper mine, Northparkes, in central west NSW, with the copper smeltered overseas.
RIO is the world’s largest seaborne salt exporter with 68.4% owned subsidiary Dampier Salt producing 6 million tonnes a year in three locations.
RIO has a marine division which owns five ships with another 15 to be delivered in 2014, to meet its own transport needs.

Technical analysis considerations for the share-price:

A 3 day rally after the announcement carried the share price high of $67.88, a lower high to the previous high of $69.34. This suggested that sellers were not prepared to wait for higher prices, and concerned not to be caught in a falling market, sacrificing their profit margin.
Despite this, the present trend upwards remains intact at this stage.
The closing price this past week was a $66.06
The 38.2% Fibonacci retracement level (H 69.34, L 56.42) is at $64.34 and another support line at $64.75
A fall in the share-price below this zone would indicate a change in trend, and further lower prices, with the next level of support at the 50% Fibonacci retracement level of $63
The 61.8% level at $61.30 is the next likely level for the share-price to rebound.

Disclaimer

The opinions above are those of the author only, and not investment advice. Please do not rely on this information when making decisions.