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Rio Tinto (RIO) to Invest $395M in Water Desalination Plant

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Rio Tinto (RIO - Free Report) announced intentions to invest $395 million in a saltwater desalination plant in the Pilbara region of Western Australia. This project will use reverse osmosis to filter salt and other impurities from ocean water and provide a future water supply for RIO's coastal operations and local communities in 2026.

The project is subject to Commonwealth and State Government and other relevant approvals. The plant’s construction is projected to start in 2024 and is anticipated to be operational and generate water in 2026. Rio Tinto intends to create roughly 300 jobs during the plant's peak construction period.

The plant will be built within the company's existing iron ore port operations at Parker Point. Water from the plant will be transferred to the West Pilbara Water Supply Scheme, which is owned and operated by the Water Corporation. From there, it will be distributed to Rio Tinto’s coastal communities and operations. The company will also build a new supply pipeline that will connect the plant to the existing water network.

In order to avoid disruption to the local environment, RIO will make use of Parker Point facilities’ existing infrastructure. It will use reverse osmosis to remove salt and other contaminants from ocean water.

The plant's nominal capacity will be four gigaliters per year at first, with a scope of an increase to eight gigaliters in future.

This investment of $395 million is part of the company’s sustaining capital expenditure budget for the fiscal  year. Rio Tinto maintains its capital expenditure guidance at $9 billion to $10 billion for fiscal 2024 and 2025.

Price Performance

In the past year, shares of Rio Tinto have lost 19.5% compared with the industry’s 26.2% decline.

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Zacks Rank & Stocks to Consider

Rio Tinto currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are AngloGold Ashanti (AU - Free Report) , Gold Fields Limited (GFI - Free Report) and Alamos Gold Inc. (AGI - Free Report) . AU and GFI currently sport a Zacks Rank #1 (Strong Buy) while AGI carries the same rank  as FSM. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for AngloGold Ashanti’s earnings per share is pegged at $1.94 for 2023. Earnings estimates have been revised 22% upward in the past 60 days. The company has gained 36.1% in a year.

The consensus estimate for Gold Fields’ fiscal 2023 earnings per share is pegged at $1.01. Earnings estimates have moved 6.3% north in the past 60 days. Its shares have gained 56% in the past year.

The Zacks Consensus Estimate for Alamos Gold’s earnings per share is pegged at 47 cents for 2023. Earnings estimates have been revised 14.6% upward in the past 60 days. AGI has gained 49.5% in a year.

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