Broker snap: Rio Tinto offers solid value, says Credit Suisse
Turquoise Hill, 51% owned by Rio, released a revised report on the project which pointed higher capital expenditure costs. Meanwhile, phase two scope changes involve a lower work programme that excludes concentrator expansion and removes the construction of a power plant.
"A capex increase has been well anticipated by the market in our view and reflected, along with lower iron ore, in Rio’s current share price," Credit Suisse said.
"The potential scope changes are consistent with Rio’s (and sector), new paradigm to lower capex and development risks,something the market should welcome."
The broker said that at 8.4 times 2013 earnings (on its $120/tonne iron-ore forecast), "Rio shares offer solid value".
Furthermore, its current iron-ore price forecasts for 2014-2016 also point to a price-to-earnings ratio of less than 10.
Shares were up 1.33% at 3,126.5p by 10:20 on Wednesday.
BC
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