RIO TINTO and other big miners preparing to meet shareholders over the coming weeks will face tough questions over ever larger and more capital intensive projects at a time when robust commodity prices have cooled.
The top mining stocks have had a troubled few weeks, with the UK- listed sector sliding by almost a fifth since the start of February and valuations languishing at almost half their 10-year average.
“Shareholders are desperately concerned about capex [capital expenditure] inflation,” analyst Des Kilalea at RBC Capital in London said.
“Capex inflation without a concomitant increase in the underlying price of the commodity is not good and at the moment we are seeing commodity prices flat to down.”
Rio, which meets its London-based investors next Thursday, has been in the spotlight over rising costs at Oyu Tolgoi, the flagship Mongolian copper-gold mine that it controls through its majority stake in Ivanhoe Mines.
However, analysts say both Rio and larger rival BHP Billiton have signalled they are listening to shareholder concerns over capex and cost escalation. – (Reuters)
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