Weekly Metals And Mining Recap: ArcelorMittal, Newmont And Rio Tinto

+14.45%
Upside
27.47
Market
31.44
Trefis
MT: Arcelor Mittal logo
MT
Arcelor Mittal

Metals and mining stocks had an eventful week with ArcelorMittal unveiling a new range of steels, Newmont Mining reaching an agreement with the Indonesian government over the issue of export taxes and Rio Tinto deciding to cut jobs. However, there were no significant changes in stock prices as a result of these events. Here are some of the major events of the week pertaining to companies that Trefis covers in the metals and mining space.

ArcelorMittal

ArcelorMittal (NYSE:MT) unveiled a new range of steels for the automotive industry. The new Fortiform range of Advanced High Strength Steels (AHSS) will offer up to 20% additional weight savings for vehicle parts over the weight savings currently offered by ArcelorMittal’s current range of AHSS. [1] This latest offering in automotive steel is part of the company’s focus on the automotive sector. ArcelorMittal’s automotive steel offerings accounted for approximately 17% of the global automotive steel market in 2013. ((ArcelorMittal’s 2013 20-F, SEC)) Shipments of automotive steel accounted for around 16% of ArcelorMitttal’ s total shipments in 2013. ((ArcelorMittal’s 2013 20-F, SEC))

Relevant Articles
  1. What’s New With ArcelorMittal Stock?
  2. What’s New With ArcelorMittal Stock?
  3. Is ArcelorMittal Stock A Buy Following Q4 Results?
  4. Will ArcelorMittal Stock Continue To See Gains?
  5. What’s Happening With ArcelorMittal Stock?
  6. Is ArcelorMittal Stock Likely To Recover From The Recent Selloff?

The company also announced that 700 new jobs will be created in 2014 at its sites in France. [2] This is indicative of the improving demand outlook for steel, particularly in Europe and the U.S. Steel demand is expected to grow at 3.1% in the EU and 3.8% in the North American Free Trade Agreement (NAFTA) region in 2014, up from contractions of 0.2% and 2.4%, respectively, in 2013. ((Short Range Outlook for Apparent Steel Use 2013-2015, World Steel Association))

We have a $14 price estimate for ArcelorMittal, which is in line with the market price. We estimate revenues of around $83 billion and EPS of $0.33 for ArcelorMittal in 2014.

Newmont Mining

Newmont Mining (NYSE:NEM) has announced the signing of a Memorandum of Understanding (MoU) with the Indonesian government, bringing to end an eight-month standoff over new regulations governing mineral exports from the country. The company halted mineral exports from Indonesia in January pending negotiations with the government over new regulations governing mineral exports, and halted the production and processing of copper concentrate in June as its storage facilities were filled to capacity. Per the terms of the MoU, Newmont and the Indonesian government will negotiate an amended investment agreement or contract or work (COW), addressing various dimensions of Newmont’s operations in Indonesia. Effective with the signing of the MoU, the company has agreed to provide a $25 million assurance bond to demonstrate its commitment for smelter development in Indonesia. [3] The company has also agreed to pay higher royalties of 4% for copper and 3.75% for gold, up from 3% and 1% respectively. [4] Newmont will now pay a revised duty of 7.5% on its copper concentrate exports, which will decline to 5% when smelter development progress exceeds 7.5%, and 0% when development progress exceeds 30%. ((PTNNT to Resume Operations and Copper Concentrate Exports, Newmont News Release)) The terms of the MoU are along expected lines, with similar terms previously offered to Freeport McMoran (NYSE:FCX) that enabled it to resume mineral exports from Indonesia. [5]  

We have a $25 price estimate for Newmont, which is around 1% below the market price. We estimate revenues of around $7.6 billion and an EPS of $0.85 for Newmont in 2014.

Rio Tinto

Rio Tinto (NYSE:RIO) has decided to cut up to 100 jobs at its Kestrel coal mine in Queensland, Australia. [6] This move is aimed at reducing costs in order to maintain the competitiveness of the company’s Kestrel coal mine in an environment of subdued coal prices. The prices of both metallurgical and thermal coal are far below their post-recession highs of 2011, due to weak demand and an oversupply situation. Chinese steel demand growth is expected to slow to 3% and 2.7% in 2014 and 2015 respectively, from 6.1% in 2013. [7] Weak Chinese demand for steel is translating into weak demand for metallurgical coal. Weak demand for thermal coal from major consumers such as China and India has translated into weak demand for thermal coal, which has put pressure on prices. The decision to cut jobs at the Kestrel coal mine is the latest in a series of moves by Rio over the last year to restructure its coal portfolio in response to the subdued coal pricing environment.

We have a $52 Trefis price estimate for Rio Tinto, which is around 1% below the market price.

See More at TrefisView Interactive Institutional Research (Powered by Trefis)| Get Trefis Technology


Notes:
  1. ArcelorMittal unveils Fortiform, a range of new advanced high strength steels for safer and lighter cars, ArcelorMittal News Release []
  2. ArcelorMittal announces 700 new jobs in France, ArcelorMittal News Release []
  3. PTNNT to Resume Operations and Copper Concentrate Exports, Newmont News Release []
  4. Newmont signs MoU with Indonesia govt, to resume copper exports next week, Reuters []
  5. Resumption Of Exports From Indonesia Provides A Boost To Freeport McMoran, Trefis []
  6. 100 jobs to go from Rio Tinto’s Kestrel mine complex, Central Queensland News []
  7. Short Range Outlook for Apparent Steel Use 2013-2015, World Steel Association []