Rio Tinto Investment Summit

G’day.  Rio Tinto is currently hosting an investment summit in Sydney.  Seen as a bellwether company in the commodity space, here are some observations:

  • Contagion from Eurozone countered with positive outlook for Asian markets and inflationary pressures easing in China
  • Sign of softness in some markets.  Worried when softness is coupled with increasing costs and strength in AUD and CAD.
  • To cope with higher iron ore demand from China, capital expenditures will be $14bn next year, up 17%.  They have already bought back $5bn in stock this year.
  • LT Growth Rates
    • As Oyu Tolgoi ramps up, mined copper production CAGR for 2010-15 is now estimated at 8.2%
    • Coking coal production CAGR for 2010-15 is now estimated at 9.8%
    • 2010-15 production CAGRs for thermal coal, alumina, and iron ore are now estimated at 7.6%, 7.1%, and 6.5%, respectively.
  • Aluminium exceeds copper expenditure per capita once GDP per capita exceeds $15,000 per year.  Foresees world average income per capita approaching $18,000 to $20,000 around 2025.
New Zealand Election

In slightly related news, New Zealand Prime Minister John Key won re-election, with 48% of the vote, up from 45% three years ago.  He plans to overhaul the welfare system and pursue asset sales to help close the deficit.  As of this report, intraday rates for AUD are up 174 bps against USD while NZD is up 186 bps against USD.

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