Liberum reiterates 'sell' on Rio Tinto despite "solid" Q2

16th Jul 2014 12:18

Broker Liberum has repeated its 'sell' call on Rio Tinto despite admitting that the miner achieved a "solid" second quarter in terms of production.Production in the iron ore division, which accounts for around half of group revenues, was up 10% over the year at 139m tonnes "but below our (admittedly top-of-the-range) 145m tonnes estimate - we thought there may have been scope for a positive surprise here", Liberum said.Nevertheless, Rio Tinto kept its full-year guidance for copper and even raised its targets for copper after a better-than-expected second quarter.However, the broker still remains cautious: "Rio still looks vulnerable to us in the second half as the impact of sustained higher iron ore production hits the market, with consensus numbers reflecting a recovery in iron ore prices, lump premiums and a reduction in discounts." Analysts also said that the Chinese property sector is yet to show signs of recovery despite recent efforts by the government. "Meanwhile, iron ore supply will be stronger again in the second half and we expect pressure on prices will remain," Liberum said.The broker maintained a target price of 2,800p for the stock, which was trading 2.7% higher at 3,332p by 12:17 on Wednesday.BC