Macquarie expresses preference for Rio Tinto over BHP after Q2 production update

20th Jul 2016 11:04

(ShareCast News) - Analysts at Macquarie reiterated their 'outperform' stance on shares of Rio Tinto following the mining group´s second quarter calendar year production update.They also reiterated their preference for the miner´s shares over those of rival BHP Billiton.Overall, the update was mixed, they said, with stronger output of bauxite, alumina, aluminium and thermal coal offset by weaker production of copper, hard coking coal and diamonds.For the first time ever, Rio segregated its guidance for iron ore production from its Pilbara and IOC operations, split between 330mt from the former and 20mt from the latter, they pointed out.A larger than expected impact from planned maintenance at Diavik was likely the main culprit behind reduced guidance for diamonds, the Australian broker said.Macquarie also identified then current spot iron ore prices at $53.9 per metric tonne, which were above their forecasts, as an upside risk to its base-case earnings and valuation for Rio."Production guidance for all key commodities has been left broadly unchanged, and there was no change to the development schedules for Nammuldi, Amrun or Oyu Tolgoi. Bouyant spot iron-ore prices continue to present upside risk to our base-case earnings forecasts for RIO in 2016, and the stock's superior cash-flow generation at spot prices and stronger balance sheet are key drivers behind our preference for RIO over 'underperform'-rated BHP Billiton."