From CommSec Research Insight -Last traded: $81.75 Sector:...

From CommSec Research Insight -
Last traded: $81.75
Sector: Mining
Market cap: $149,212m
Buy Price target: $91.00

RIO is outstandingly cheap
We maintain our Buy recommendation and AUD91 price target. Earnings will continue to
increase in 2H10 and into 2011. RIO is now generating significant surplus cash flow, which will
be used to fund additional growth.

Summary of previous report dated 20 October 2010

Pilbara expansion to 283Mt approved
RIO has announced approval for a USD3.1b expansion of its iron ore infrastructure in the
Pilbara to take capacity to 283Mtpa in 2013. This announcement follows an announcement on
14 July 2010 of a USD200m dredging program at the Cape Lambert Port. The timing of the
expansion appears to have been brought forward by about six months, we speculate in
response to the end of the iron ore JV with BHP Billiton. This is the first stage in an expansion
that will ultimately move to 330Mtpa, although RIO will not approve the further expansion until it
is more confident in the medium-term iron ore outlook. RIO?s share of the expansion capex is
USD2.1b, and makes up a significant portion of the USD3b ?gap? between announced USD9b
capex target in 2011 and previously sanctioned projects of about USD6b.