Three Important Mining Sector Stocks With Recent Updates – RIO, IGO and CIM

  • Sep 27, 2019 AEST
  • Team Kalkine
Three Important Mining Sector Stocks With Recent Updates – RIO, IGO and CIM

S&P/ASX 300 Metals & Mining Index was trading at 4,321.6, up 5.2 points or 0.12%, while the benchmark index S&P/ASX 200 was trading upward by 32.2 points or 0.48% on 27 September 2019 (AEST 03:41 PM). Three important mining sector stocks with recent updates have been discussed below - Rio Tinto Limited, Independence Group NL and CIMIC Group Limited.

Rio Tinto Limited

Rio Tinto Limited (ASX: RIO) is involved in minerals and metals exploration, production, development, processing and marketing. Recently, at Bernstein Strategic Decisions Conference in London, the company highlighted its sustainable development in action, including

  • All injury frequency rate (AIFR) in H1 2019 reported at 0.41.
  • Reduction in carbon footprint by around 65% at Kennecott through closing coal plant and focus on renewable energies.
  • ‘Zero’ coal production in H1 2019.
  • Four additional aluminium assets undergoing ASI certification
  • Additional US$0.3 billion investment in the Resolution Copper project in Arizona.
  • New R&D facility ‘Elysis’ to develop carbon free aluminium.

The company also highlighted that global steel production growth was reported at 4.4% in H1 2019 (on a Y-o-Y basis). During this time, iron ore stocks at port reduced by ~20% in H1 2019. Global aluminium demand growth dipped to ~1% in H1 2019 (on a Y-o-Y basis), and due to lifting of sanctions aluminium supply increased. As a result, significant proportion of producers are presently unprofitable. In case of copper, macro headwinds and trade concerns are impacting sentiment, and H1 2019 saw supply disruptions by ~3%.

H1 2019 Financial Highlights (ended on 30 June 2019): Gross revenue for the period increased by 3% to US$21.8 billion, while underlying EBITDA for the period was reported at US$10.3 billion and EBITDA margin stood at 47%. Pilbara operations contributed majorly to the company’s financial performance with EBITDA margin of 72%, supported by strong iron ore prices.

Operating cash flow for the period was reported at US$6.4 billion, and free cash flow for the period was reported at US$3.9 billion, which is 35% higher than the previous corresponding period. Return on capital employed for the period rose by four percentage points to 23%, as compared to previous corresponding period.

Stock Update

On 27 September 2019 (AEST 03:44 PM), the stock of RIO was trading at a price of A$91.610, up 0.537% from its previous close, with the market cap of ~A$33.83 billion. Its current PE multiple is at 7.970x and its last EPS was noted at A$11.435. Its 52 weeks high and 52 weeks low stand at A$106.922 and A$68.169, respectively. The stock has generated an absolute return of 19.18% for the last one year, -1.88% for the last six months and -10.78% for the last three months.

Independence Group NL

Independence Group NL (ASX: IGO) is involved in the mining and processing of nickel, copper and cobalt at the Nova Operation, non-operator gold mining from its 30% interest in the Tropicana Operation and ongoing mineral exploration in Australia and overseas.

Recently, the company decreased its stake in Orion Minerals Ltd from 8.23% to 6.23%, effective from 24 September 2019. In a previous update, IGO had informed the market regarding a casualty at the Nova Operation in the month of September 2019. During the incident, an employee got injured on site and subsequently passed away in the hospital. The incident happened when the person was securing the truck’s load prior to departure from site. Following the incident, the Department of Mines, Industry Regulation and Safety was immediately informed by the company. Owing to the investigation, the company had suspended its operations for 29 hours.

FY19 Key Highlights (ended 30 June 2019): For the financial year 2019, Independence Group reported

  • Revenue and other income at A$793 million.
  • Underlying EBITDA for the period was reported at A$341 million.
  • EBITDA margin stood at 43%.
  • Net cash from operating activities was reported at A$372 million.
  • Underlying free cash flow for the period reached A$278 million
  • Cash balance and net cash at the end of the period was reported at A$348 million and A$263 million, respectively.
  • Net profit after tax (NPAT) grew by 44% year-on-year to A$76 million.
  • The Board of Directors declared a final dividend of A$0.08 per share (97% franked), taking the total dividend to A$0.10 per share. The record date and payment date for the final dividend are 13 September 2019 and 26 September 2019, respectively.

Stock Update

On 27 September 2019 (AEST 03:47 PM), the stock of IGO was trading at a price of A$6.510, up 0.93% from its previous close, with a market cap of ~A$3.81 billion. Its current PE multiple is at 50.04x and its last EPS was noted at A$0.129. Its 52 weeks high and 52 weeks low stand at A$6.640 and A$3.560, respectively. The stock has generated an absolute return of 39.61% for the last one year, 34.66% for the last six months, and 35.50% for the last three months.

CIMIC Group Limited

Engineering-led construction, mining, services and public private partnerships leader, CIMIC Group Limited (ASX: CIM) is in the news for mulling strategic options for some of its mining services operations under the Thiess and Sedgman brands, which represent CIM’s mining and mineral processing units. The company is believed to be in talks with investment bank J.P. Morgan and other advisers, which have initiated signing up players that are interested in non-disclosure deals. As per market reports, important points such as buyer’s appetite for assets are being considered, while potential acquirers have also been approached.

In another update, CPB Contractors (CIMIC Group company) has been appointed to construct the new Sydney Metro City & Southwest Pitt Street Station by the state government of New South Wales. The integrated station development is expected to provide a 250 m (metre) long underground Pitt Street Station connecting the station entries from Park Street to Bathurst St with retail and other commercial facilities. The contract covering the station design and construction would generate approximately A$463 million in revenue for CPB Contractors.

H1FY19 Key Highlights (ended 30 June 2019): For the six-month to June 2019, CIMIC Group Limited reported consolidated interim results, including

  • Group revenue excluding revenue of joint ventures and associates stood at A$7 billion, representing an increase of 0.3% from the same period a year ago.
  • Net profit after tax for the period was reported at A$367 million.
  • Earning margins such as EBIT, PBT and NPAT margins for the period were stable at 8.2%, 7.2% and 5.3%, respectively.
  • Net cash for the period increased by 5% since June 2018 to A$1.4 billion.
  • Strong investment grade rating reaffirmed by Standard & Poor’s at BBB with stable outlook.
  • The Board of Directors declared an interim ordinary dividend of A$0.71 per share (fully franked), payable on 3 October 2019.
Income Statement

H1FY19 Income Statement (Source: Company Reports)

Stock Update

On 27 September 2019 (AEST 03:50 PM), the stock of CIM was trading at a price of A$31.360, up 0.416% from its previous close, with a market cap of ~A$10.13 billion. Its current PE multiple is at 12.910x and its last EPS was noted at A$2.419. Its 52 weeks high and 52 weeks low stand at A$51.670 and A$28.880, respectively. The stock has generated an absolute return of -39.43% for the last one year, -37.15% for the last six months, and -30.71% for the last three months.


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