December quarter production was broadly in line with UBS estimates. A strong performance at Escondida and increased production at Kennecott were highlights.
The company continues to envisage raw material price inflation, particular in aluminium.
UBS notes the company still has US$4.4bn in divestment proceeds that are unallocated, and believes this could be returned to shareholders with the US$2.5bn top up of the US$1.1bn 2019 buyback program.
Buy rating maintained. Target is reduced to $88 from $90.
Target price is $88.00.Current Price is $81.20. Difference: $6.80 – (brackets indicate current price is over target). If RIO meets the UBS target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).