Macquarie Group experts run the rule over Australian iron ore mining titans BHP and Rio Tinto
Analysts from the so-called “millionaire’s factory” — Macquarie Group — believe one of Western Australia’s iron ore behemoths is a better choice for punters than the other.
In a note to clients late on Thursday, Macquarie said it expects Rio Tinto’s 2023 financial results — to be released later this month — to be weaker than the year prior.
“Our base case forecasts expect earnings before interest, tax, depreciation and amortisation of $US24.3 billion and underlying earnings of $US12.1b, which are 8 per cent and 9 per cent lower than the prior period,” it said.
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By continuing you agree to our Terms and Privacy Policy.Macquarie said 2024 could be an “inflection year” for Rio, with a key focus on the “aggressive rail construction timeline” for its $US6.2b portion of the mega Simandou iron ore project in the West African nation of Guinea.
Rio’s low-grade iron ore product from its WA mines will likely remain elevated for the next few years, Macquarie said, but this will be dependent on how quickly the miner can bring online its replacement projects in the State.
It has a $120 price target on Rio, around $13 lower than the current share price.
Meanwhile, earlier this month Macquarie slapped a $49 target on BHP, just under $1.50 more than what the miner currently trades for.
Macquarie said the integration of BHP’s $9.6 billion acquisition of Australian copper miner OZ Minerals was completed six months ahead of schedule, which is “a key positive in our view”.
The analysis noted BHP is set to write down the value of the struggling Nickel West business — which has been stung by the ongoing nickel price rout — when its financial results are tabled later this month.
BHP will also have to navigate a recent Brazilian court’s ruling that its 50/50 Samarco joint venture in the South American country will have to pay $14.7b plus interest to compensate victims of a 2015 dam burst that killed 19 people.
BHP can appeal the judgement.
In its most recent annual report BHP provisioned about $5.6b for the dam failure.
