Rio's ore supremacy

Citigroup expects Rio Tinto’s iron ore production to improve and for it to gain the upper hand on BHP.

Citigroup’s mercurial analyst Clarke Wilkins, who has criticised Rio Tinto (RIO) chief executive Sam Walsh’s iron ore expansion in the Pilbara, still likes the stock and prefers it compared with BHP (BHP).

“The record capex spend of recent years is finally driving production growth for BHP and Rio,” says Wilkins. “But BHP’s performance in the first half of 2013 clearly outstripped a weather hamstrung Rio. If nature plays ball we expect Rio’s production performance to improve in the second half of 2013 and 2014 and gain the upper hand on BHP” (see Tim Treadgold's Re-examining Rio).

Wilkins’ 12-month target price for Rio’s stock is $67. His share price target for BHP is $35.

At 1251 AEST BHP shares were down 40 cents, or 1.2%, to $33.82. Rio’s shares had dropped 70.5 cents, or 1.2%, to $$55.995. In the last 12 months Rio shares have gained 6.1% and BHP’s stock is up 12% compared with the 21% gain in the S&P/ASX200 Index, according to Bloomberg data.

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