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Rio Tinto (RIO), Gemco Partner to Build Rail Car in Pilbara

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Rio Tinto Group (RIO - Free Report) has announced that it is entering a partnership with Western Australia-based company Gemco Rail. Through this agreement, RIO will bring local iron ore rail manufacturing and bearing maintenance to the Pilbara region.

RIO aims to invest A$150 million ($101.2 million) over the next six years to buy 100 locally built ore rail cars. Rio Tinto also intends to invest in bearing refurbishment for the next 10 years to support its Pilbara operations.

Gemco will build the first 40 ore cars at its existing facility in Forrestfield. The companies expect the first rail car produced in Western Australia to be delivered in 2024.

Meanwhile, the companies will build an additional facility in Karratha, which will produce an average of 10 ore cars every year. This new site is expected to be established by the end of 2024, subject to the availability of a suitable property.

The Karratha-based facility will reduce transit issues between the Pilbara and Perth while eliminating 300 tons of CO2 emissions each year.

The construction of Pilbara's first rail ore car manufacturing and maintenance facility is expected to create jobs, and increase spending with local and Indigenous businesses. It will further promote local economic growth.

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

Price Performance

In the past year, shares of Rio Tinto have lost 7.4% compared with the industry’s 12.2% decline.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Zacks Rank & Stocks to Consider

Rio Tinto currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Piedmont Lithium Inc. (PLL - Free Report) , Franco-Nevada (FNV - Free Report) and Gold Fields Limited (GFI - Free Report) . PLL and FNV currently flaunt a Zacks Rank #1 (Strong Buy), and GFI carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Piedmont Lithium’s earnings per share is pegged at $6.29 for 2023. Earnings estimates have been revised 62.9% upward in the past 60 days. PLL has gained 26.5% in a year.

The Zacks Consensus Estimate for Franco-Nevada’s fiscal 2023 earnings per share is pegged at $3.51. Earnings estimates have moved 9.3% north in the past 60 days. FNV has a trailing four-quarter earnings surprise of 2.8%, on average. Its shares have gained 3.4% in the past year.

The Zacks 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. GFI’s shares have gained 65.7% in the past year.

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