results and impact on bhp, page-9

at $72.35 and rising Apparently, analysts have started upgrading their forecasts based on the latest production report.


Analysts tip higher Rio Tinto profits
19/01/2006 01:15:04 PM

Analysts have nudged up profit expectations for Rio Tinto for 2005 after the mining giant reported a strong fourth quarter operational performance.

But the risk of increased costs has tempered expectations.

Rio Tinto on Wednesday posted record iron ore, alumina and molybdenum production for 2005.

Rio Tinto delivered a net profit of $US2.18 billion ($A2.92 billion) for the 2004 year, but already nearly beat that figure in the first half of 2005 with a record interim net profit of $US2.16 billion ($A2.89 billion).

UBS Investment Research on Thursday raised its 2005 earnings estimate by 1.4 per cent to $US5.024 billion ($A6.73 billion) after the fourth quarter production report.

The mining giant has warned shareholders an operational issue at its Palaboro copper mine in South Africa may reduce the life of the mine.

Rio has a 47.2 per cent stake in the mine, which uses a block-caving method of mining.

Surface subsidence at the base of the open pit has introduced waste material, making part of the reserves inaccessible.

Rio said the event was not expected to impact mine production in the near term but could reduce the overall life of the mine in the longer term.

A spokesperson said the mine was only a small contributor to Rio's earnings.

"The better than expected iron ore and molybdenum production offset the weaker than expected coal and copper production," UBS said in a research note.

"We continue to look for a good profit result with a high probability of additional capital management initiatives."

Goldman Sachs JBWere upgraded its earnings per share forecast for 2005 by 1.5 per cent due to higher sales of iron ore and copper.

It noted the higher sales were offset by lower coal production and increased costs at Bingham Canyon.

"While we expect there to be a prominent focus on increased costs, the underlying cash flow delivered from high commodity prices should be exceptionally strong," Goldman Sachs said.