Broker snap: UBS cautious about iron ore sales at Rio Tinto

18th Jul 2012 11:25

UBS has reiterated its 'buy' recommendation for mining group Rio Tinto despite second-quarter iron ore sales coming in below forecasts.The broker admits that the second-quarter performance was strong across most of the portfolio against its production forecasts.However, iron ore shipments didn't reach UBS's estimates, with production exceeding sales in the quarter."We had thought RIO might unwind part of the inventory position built during Q1 2012. The lower shipments of iron ore was perhaps the stand out, but we note there was a significant shutdown of the Cape Lambert port facilities and Rio says they continue to build stocks at the mines ahead of expansion to 283Mtpa."The lower-than-expected iron ore shipments means that the broker has reduced its underlying earnings estimates for the full year, however this is more than offset by the inclusion of a $230m gain on the sale of Kalahari Minerals and Extract.The broker's target price has been cut from 4,800p to 4,750p.By 11:24 on Wednesday, shares were down 0.62% at 2,899.BC