Rio Tinto (Price: 3245p | Target: 3220p | Rec: Hold) Rio Tinto delivered a solid 2Q14 production result, with iron ore sales up 13% QoQ to deliver 1H14 sales of 142.4mt (+20% YoY).

FY14E iron ore guidance has been maintained at 295mt (100%), but with shipments guided to 300mt.

While there were modest downward volume revisions in other divisions, this quarter was positive overall and we have increased FY14E EPS from 483p to 496p.

That said, the upgrade has been more than reflected in the market and we believe the company is currently fully valued. * Rio Tinto’s share of 1H iron ore production of 109.9mt was in line with consensus’ 110mt and 3% ahead of our forecast.

The Pilbara expansion to 360mtpa is continuing as planned, with 330mt expected in 2015. * Our revised earnings forecasts reflect 2Q production numbers and recent partial changes to our commodity price deck.

Key commodities, iron ore and copper, were revised before.

Our FY14E EPS is up 3.7% from 483cps to 496cps while FY15E EPS is down 3.9% from 566cps to 544cps.

Note that we assume an iron ore price of $110/t (62% fines, CIF) for 2H14E, and an average of $107.5/t in FY15E.

At today’s spot of $98/t ($91/t FOB), our EPS would come down by 7% to 463cps for FY14E and by 9% to 497cps for FY15E, demonstrating that Rio Tinto’s increasing iron ore volumes will be absolutely necessary to offset a weakening price. * Our target price is based on an equally-weighted average of five metrics, namely NPV, the dividend yield, one-year forward PER, free cash flow yield and a sustainable PER.

Rio Tinto appears fully valued on this basis, as it is using peer group multiples against the various commodity divisions, as illustrated in this note.

Key risks still relate to global growth, particularly China, and the ongoing impact on the iron ore price of new supply in 2H14.
To access the full note please click here Analyst: Hunter Hillcoat +44 (0)20 7597 5182
To UNSUBSCRIBE from this email and/or to change your mailing list preferences, please email .
IMPORTANT NOTICE: This communication forms part of an electronic communication sent to the intended recipient (or such persons authorised representative) for their sole use and is subject to important legal and regulatory restrictions, qualifications and disclaimers that may be accessed and read in the attached research publication.

If you cannot access the disclaimer, please obtain a copy thereof from us by sending an e-mail to in the case of SA or in the case of the UK or Australia: The disclaimer is deemed to form part of this communication.

In the event of a conflict between the disclaimer and this notice, the disclaimer shall take precedence.

This communication is confidential for the information of the addressee only (and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, unless permitted pursuant to and in accordance with the disclaimer. If you are not the intended recipient of this e-mail, then: (a) please notify the sender of this e-mail immediately by return e-mail, facsimile or telephone and delete this message from your system; (b) you may not print, store, forward or copy this message or any part thereof or disclose or cause information in this message to be disclosed to any other person. Nothing in this message constitutes an offer, warranty or representation from us.

None of our employees or representatives are permitted to send unsolicited messages ("spam") and our company cannot be held liable therefore.

If you regard this message as spam, please inform us immediately by sending an e-mail to in the case of SA or in the case of the UK or Australia: Unless otherwise agreed: (a) We are only deemed to have received an e-mail once we have confirmed receipt thereof to you; (b) We are deemed to have sent an e-mail once reflected as “sent” on our e-mail server. If this message contains offensive, derogatory or defamatory statements or materials, it means the message has been sent outside the sender’s scope of employment with us and only the sender can be held liable in his/her personal capacity.

Our corporate information and names of our office bearers can be accessed by sending an e-mail to in the case of SA or in the case of the UK or Australia: The disclaimer applies to our original message, any attachments and all subsequent messages or attachments we may send.
_____________________________________________________________________ Investec Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales (No.

489604).

Registered office at 2 Gresham St, London EC2V 7QP. Investec Asset Finance plc is authorised and regulated by the Financial Conduct Authority for credit-related regulated activities (including hiring).

Investec Asset Finance plc is also an appointed representative of Investec Bank plc for the purposes of insurance mediation activities.

Registered in England and Wales (No.

2179313).

Registered office at Reading International Business Park, Reading RG2 6AA. We may monitor e-mail traffic data and the content of email.

Calls may be monitored and recorded. This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom they are addressed.

If you have received this email in error please notify the sender.

This e-mail is subject to terms available at the following link: www.investec.co.uk/emaildisclaimer.

By communicating electronically with us, you consent to these terms. _____________________________________________________________________ _____________________________________________________________________ This email has been scanned by the Symantec Email Security.cloud service. For more information please visit http://www.symanteccloud.com Private & Confidential / Disclaimer: This document is private and confidential and remains the property of Bell Pottinger.

Its contents may not be copied, forwarded or duplicated in any form or by any means without the permission of Bell Pottinger.

Bell Pottinger is made up of Bell Pottinger Private Limited, a limited company registered in England & Wales with registered number 08024999 and Bell Pottinger LLP, a limited liability partnership registered in England & Wales with registered number OC380478, together with their subsidiaries.

Our registered office is at 6th Floor, Holborn Gate, London WC1V 7QD.

A list of the members of Bell Pottinger LLP is open for inspection at our registered office.