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Rio Tinto Ltd (ASX: RIO) is set to release its highly anticipated quarterly update on Tuesday, 16 July 2024. As this date approaches, investors are keen to know what the market expects from the mining giant's second-quarter performance.
Iron Ore Shipments: Challenges and Recovery
According to a note from Goldman Sachs, analysts predict that Rio Tinto may fall short of expectations for its iron ore shipments during the quarter. This shortfall is attributed to a train derailment early in the quarter, which disrupted operations. However, the analysts believe that Rio Tinto will recover from this setback in the second half of the year and meet its annual guidance. Specifically, they forecast Rio Tinto's second-quarter Pilbara iron ore shipments to be 79 million tonnes (Mt) compared to the consensus estimate of 82Mt. For the full year, they project shipments of 330Mt, within the company's guidance range of 323-338Mt. Additionally, they expect realized prices of US$107 per dry metric tonne (dmt) for the first half of 2024.
Copper Production and Prices
In the copper segment, Goldman Sachs forecasts production of 180 kilotonnes (kt) for the quarter, slightly above the consensus estimate of 175kt. They also anticipate that Rio Tinto's realized copper price will be higher than the market expectation, at US$412 per pound compared to the consensus of US$395 per pound.
Aluminium Outlook
For aluminium, Goldman Sachs expects Rio Tinto to report production of 832kt, just above the consensus estimate of 829kt. They also project a realized price of US$2,818 per tonne, higher than the consensus of US$2,770 per tonne.
Financial Position
At the end of the period, Goldman Sachs predicts that Rio Tinto will have a net debt position of US$4.9 billion, compared to the consensus estimate of US$4.5 billion. This slight discrepancy suggests that while the company may face some financial strain, it remains within a manageable range.
Investment Recommendation
Goldman Sachs continues to see value in Rio Tinto shares at current levels. The brokerage has a buy rating on the stock with a price target of AU$137.00, indicating a potential upside of almost 14% from the current levels. This positive outlook is based on Rio Tinto's ability to recover from operational disruptions and meet its production and financial targets in the second half of the year.
