Some summary points
1. " Results posted by Rio this week showed its aluminium division threw off $US1.58 billion in earnings in 2017, the highest since the infamous Alcan acquisition. The global miner believes Chinese reforms could mean aluminium markets have reached "a turning point".
2. "Operating in the first decile of the cost curve, Rio's Canadian smelters were able to survive the downturn. If Rio is reading China right, the Canadian smelters could now be about to thrive."
3. "Rio is studying options to expand its Canadian smelters in case China's curtailments do in fact lead to a shortage of aluminium in the rest of the world."
4. "Aluminium prices measured on the London Metals Exchange have risen 50 per cent since November 2015."
In summary, like what China has done for the I Ore market causing demand for the higher grades (which has benefited RIO), as China curtails production in alum, the price rises on the LME, and RIO will reap the benefits.
There is a high probability that the excellent result from 2017 could be repeated or even beaten in 2018. The implication for shareholders is good dividends and more share buybacks.
HT1
RIO Price at posting:
$76.86 Sentiment: Hold Disclosure: Held
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