Are RIO, BHP Set To Sustain Higher Stock Levels?

  • May 18, 2019 AEST
  • Team Kalkine
Are RIO, BHP Set To Sustain Higher Stock Levels?

The share price of below-mentioned mining stocks is currently trading at a higher level. Both the stocks, BHP and RIO, have provided significant returns in the last six months. Let’s take a closer look at each one of them.

Rio Tinto Limited (ASX: RIO)

A leading global mining group, Rio Tinto Limited (ASX: RIO) has witnessed an improvement of 30.88% in the share price for a period of six months. 2018 was another successful year for the company and its shareholders.

In 2018, the company generated US$18.1 billion of underlying EBITDA, with a strong margin of 42%. Further, the company delivered cash of US$11.8 billion from its operations. In 2018, RIO improved its ability to drive greater productivity and efficiency.

Resilient group EBITDA margins (Source: Company Report)

During the year, the company achieved US$8.6 billion pretax in asset sales with exits from coal and Grasberg and also invested US$5.4 billion in its world-class portfolio, which generated ROCE of 19%. During the year, the company has progressed with the exciting growth projects in iron ore, in copper and in bauxite, many of which are in Australia.

The company consistently review all of its controls and systems to ensure that it is as strong as it can get. Further, the company will constantly manage its tailings risks through governance framework, which includes external assurance.

In the recently conducted Bank of America Merrill Lynch Metals & Mining Conference, the company highlighted the ‘New Era’ of complexity, which includes growing geopolitical tensions, changing economic development, technological disruptions and higher societal expectations, creating challenges and opportunities for the Metals and Mining industry.

The company is confident that it has laid a strong foundation that will accelerate its productivity drive in 2019 and beyond. This means that there are high chances that the company will be able to sustain higher stock levels.

RIO’ shares last traded at $101.350, with a market capitalization of circa $36.85 billion as on 17th May 2019. Its 52-week high price is $102.830 and 52-week low price of $66.978.

BHP Group Limited (ASX: BHP)

A mining and metals company, BHP Group Limited (ASX: BHP) has witnessed an improvement of 21.09% in its share price over a period of last six months. The company has been focusing on maximizing its cash flow and maintaining a disciplined capital approach so that it could increase its value and returns.

In the past few years, the company has increased its volumes because of various measures. From FY16 to FY19, the company has delivered a ~50% uplift in ROCE.

ROCE Chart (Source: Company Report)

The company is planning to deliver ROCE of around 20% in FY22. In the 2019 March quarter, the company reported a strong operational performance despite facing bad weather conditions across Australia and Chile. At the recently held Bank of America Merrill Lynch Global Metals, Mining and Steel Conference, the company informed that it has the assets, options, capabilities and discipline to sustainably grow long-term shareholder value and returns.

BHP’ shares last traded at $38.460, with a market capitalisation of $110.59 billion as on 17th May 2019.


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