Shares of Rio Tinto [ASX:RIO] dropped by 2.99% on Monday, closing at $60.10. This is the lowest price it’s been since 3rd September 2013.
Rio Tinto Ltd is the world’s third largest miner. It’s known for its high quality and large scale iron ore operations, located in the Pilbara region of Western Australia.
In terms of scale and size, Rio produces around 23% of the world’s total iron ore traded by sea (seaborne market).
RIO enjoys a high profit margin, boasting an average cost of roughly AU$46 per tonne. This is the lowest cost for any miner in the world.
Nonetheless, Rio is still seen as a play on the iron ore price. The iron ore price has fallen over 26% for the year, and now sits at US$102.80 per tonne.
As such, Rio has seen its share price weaken from above $71 in February to just over $60 today.
RIO has recently reached its long-term ore production goal of 290 million tonnes per year. It’s now focussed on its 360 expansion plan, aiming to mine 360 million tonnes of iron ore per year.
Furthermore, the company has been committed to paying down debt and further strengthen its balance sheet. Since 2013, net debt has been reduced by US$4 billion to roughly $US18 million today.
The company is also on track to slash its capital expenditure to US$8 billion by 2015; this would be nearly halve its 2012 level.
Fundamentally, Rio Tinto is fast becoming an extremely shareholder friendly company.
Nonetheless, if iron ore continues to fall, the share price could see itself slipping into the high $50’s shortly.