Dallas, Texas 03/14/2014 (FINANCIALSTRENDS) – Rio Tinto plc (ADR)(NYSE:RIO) is the global mining company with diverse activities in this sector. Analysts are predicting that a drop in the prices for iron ore will have an immediate impact on the performance of RIO.
Under the current line of forecast for iron ore prices, it is expected that prices could well see the $80 per tonne figures, over a period of 24 months.
Another cause for weakness, according to analysts is the dividend which RIO offers. Considering the drop in prices of iron ore, it will increasingly become challenge for this minerals company to dole out dividends. Besides, RIO has one of the highest dividend pay -out ratio, in this industry.
RIO reliance on iron ore is the key
Rio Tinto plc (ADR)(NYSE:RIO) it appears, is more inclined to generate iron ore more than any other mineral. Therefore, analysts predict the reliance of this metal could well be the company’s undoing.
Another front where RIO is likely to be affected is the drop in consumption by key consumers. Every since China has announced a roll back on its industrial benchmarks, industries across the nation too have indicated less than normal levels of consumption of iron ore.
Therefore, for this minerals company to continue to be dependent on – first of all iron ore as the single most important production, and secondly, being dependent on continued consumption of Chinese industries, will prove to be detrimental to the future of this global mining company.
Rio Tinto plc (ADR)(NYSE:RIO) , according to analysts will see nearly 9% drop in the earnings between 2014 to 2016 time frame. This will be seen due to the fall in prices of the ore as well as the situation of oversupply of the ore, besides a drop in the consumption level of the iron ore by key consumers in China.