Broker snap: Credit Suisse optimistic about Rio

16th Apr 2012 10:40

Credit Suisse has maintained its outperform rating for mining group Rio Tinto ahead of its first quarter production report on Tuesday."We see a strong investment case for Rio led by robust steel production and iron ore demand, possibility of a buyback with the interim results, asset divestments (Pacific Aluminium/Diamonds) and an eventual conclusion to its relationship with Ivanhoe that we expect to result in an attractive entry point to one of the world's largest copper mines," the broker said.Credit Suisse experts iron ore production to moderate to 50.1Mt in the first quarter, from the fourth quarter's 51Mt, owing to the usual seasonal effects (cyclones). It also expects copper production to reflect "familiar issues of lower grades (Kennecott, Escondida) and strikes (Grasberg)", and forecasts 145kt mined and 81kt refined copper production.The broker says that the stock is trading at seven times 2012 earnings and at a 20% discount to its net discounted cash-flow based valuation (4,650p).Rio Tinto was trading 1.26% higher at 3,489.5p by mid-morning on Monday.BC