(B)(N) Global Mining & Rio Tinto PLC

Money Never Sleeps

Drama. Money never sleeps on Wall Street and even the jingle of a few coins brings out the beast while the bear’s asleep. Wall Street is touting the miracle workers in global mining who will report this week and have saved millions, possibly billions, in labour costs and new mine development on hold (Reuters, February 11, 2014, Cash is king as global miners get set to boost payouts).

Although Wall Street is not big on commodities right now (Reuters, February 11, 2014, Goldman puts ‘for sale’ sign on Iran’s old uranium supplier), the prospect of some spending money could be exciting to investors who lost $90 billion and minus (-17%) to the sector last year. Please see Exhibit 1 below for the fundamentals.

Exhibit 1: Global Mining – Fundamentals – February 2014

Global Mining – Fundamentals – February 2014

Global Mining – Risk Price Chart – February 2014

The group is trading at $150 billion below the price of risk (Risk Price (SF)) and demand for the stocks is weak with gains of $10.7 billion this year offset by losses of $11.9 billion in BHP Billiton and Vale SA, the only two companies in the group that made a profit last year.

As despairing as that is, it also means that there’s a $150 billion or +30% upside to “fair value“. We just don’t know how or when that might happen (ibid, Reuters) and our estimate of the downside in the stock prices due to the demonstrated volatility is minus (12%) in the next few months, absent further surprises.

Of the group, only Rio Tinto made it into the Perpetual Bond™ last year and then only at $45 to $50 and the current $55. Please see Exhibit 2 and 3 below.

Exhibit 2: (B)(N) The “Overvalued” Global Mining – Prices & Portfolio – February 2014

The “Overvalued” Global Mining – Prices & Portfolio – February 2014

(Please Click on the Chart to make it larger and again if required.)

Exhibit 3: (B)(N) RIO Rio Tinto PLC ADS – Risk Price Chart

(B)(N) RIO Rio Tinto PLC ADS – February 2014

Rio Tinto PLC is an international mining group that engages in finding, mining and processing the Earth’s mineral resources. Its main products are Bauxite, Alumina, Copper, Gold, Molybdenum, Silver, Nickel, Diamonds and Rutile.

(Please Click on the Chart to make it larger if required.)

From the Company: Rio Tinto plc engages in finding, mining, and processing mineral resources worldwide. The company is involved in the mining and production of aluminum products, including bauxite, alumina, and aluminum; copper, gold, silver, and molybdenum; diamonds, borates, salt, and titanium dioxide feedstocks, as well as purity iron, metal powders, zircon, and rutile; thermal and coking coal, and uranium; and iron ore. It primarily operates in China, Japan, other countries in Asia, the United States, the United Kingdom, Europe, Canada, and Australia. Rio Tinto plc was founded in 1873, has 71,000 employees and is headquartered in London, the United Kingdom.

For more information on the chart elements and additional references to the theory, please see our Post, The RiskWerk Company Glossary.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.