Rio Tinto plc (RIO - Free Report) recently provided an update on its capital spending, free cash flow and production plans for 2017 and beyond. The mining giant also highlighted that it will continue rewarding its shareholders handsomely.
The company trimmed its capital expenditure projection for 2017 from $5 billion to less than $4.5 billion. Capital spending for 2018 is predicted to be $5.5 billion (same as predicted earlier) while it is likely to be $6 billion (versus $5.5 billion expected earlier) for 2019 and $6 billion for 2020.
In addition, the company noted that its productivity program will help generate additional free cash flow of $5 billion in the five years from 2017 to 2021 (including approximately $300 million in 2017). Also, through these initiatives, additional free cash flow of approximately $1.5 billion is anticipated annually from 2021. We believe that solid cash generation will prove beneficial for the company and aid it in providing healthier returns to shareholders.
In 2017, Rio Tinto anticipates returning approximately $8.2 billion to its shareholders. This payout will include approximately $6.3 billion returns in cash in the year while $1.9 billion will be paid through share buyback to be completed by the end of 2018. Notably, the company’s cash returns in the first half of 2017 represents 40% of cash generated during the period.
Business expansion remains a priority for Rio Tinto. Its high-quality products seem to attract huge customer demand and place the company well among its peers. For 2018, the company anticipates shipping 330-340 million tons of iron ore from its Pilbara project. It expects to spend roughly $1 billion annually in the next three years in this particular project. Also, the company anticipates gaining from its initiatives to develop the infrastructure system. By 2018 end, AutoHaul project will likely be fully operational.
Aluminium production is expected to be 3.5-3.7 million tons and mined copper in the 510-610 kt range. Diamonds volume is targeted at 17-20 million carats and hard coking coal at 7.5-8.5 million tons.
Year to date, the American Depository Receipts of the company have yielded 25.6%, outperforming 15.8% gain recorded by the industry.
Zacks Rank & Other Stocks to Consider
With a market capitalization of $80.8 billion, Rio Tinto presently sports a Zacks Rank #1 (Strong Buy).
Other stocks worth considering in the industry are U.S. Silica Holdings, Inc. (SLCA - Free Report) , Centamin Plc (CELTF - Free Report) and Taseko Mines Limited (TGB - Free Report) . While U.S. Silica Holdings sports a Zacks Rank of 1, both Centamin and Taseko Mines carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
U.S. Silica’s earnings estimates for 2017 and 2018 improved in the last 60 days. Also, the company pulled off an average positive earnings surprise of 17.72% in the last four quarters.
Centamin’s earnings estimates improved for both 2017 and 2018 in the last 60 days.
Taseko Mines reported better-than-expected results in three of last four quarters, with an average positive earnings surprise of 229.17%. Also, its earnings estimates for 2017 and 2018 improved in the last 60 days.
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