CEO Tom Albanese of Rio Tinto (NYSE:RIO), the third largest mining company in the world, predicted continued uncertainty in the global economy in an interview with the Australian Broadcasting Corp. on Sunday. Albanese said that current commodity price fluctuations were due to markets trying to react to and predict what the economy would look like in the coming year, but the unpredictability wouldn’t be leveling off anytime soon.
MarketWatch quoted Albanese who said, “I don’t think this volatility is going to go away–if anything, we should expect more of these gyrations.” The CEO did offer some good news however when he predicted that the Chinese economy would continue to grow at more than 8% next year.
Commodities such as copper (NYSE:JJC), gold (NYSEARCA:GLD), tin, iron ore and coking coal (NYSE:KOL) reached record high or near record high prices earlier in 2011, just to be followed by steep declines in recent months. Iron ore, one of the most profitable commodities for Rio Tinto, has fallen 23% since September but has rebounded slightly from the $120 low to $138.80 where it stood on Friday. Albanese predicted that $120 would be the price floor in the near future, but probably not always. “As a matter of fact, as some of the large expansions come on over the next couple of years, I think that floor price will be progressively dropping,” said Albanese per MarketWatch.
The Rio Tinto (NYSE:RIO) CEO also commented on the rising cost of labor in Australia which he said was hurting production. “We’re probably paying twice as much for the same worker in Australia as in the U.S., without necessarily higher productivity,” he said. That would prevent companies from making investments in lower-margin business, Albanese said.
Here’s how other large miners are trading on the comments:
Rio Tinto Plc (NYSE:RIO): RIO shares recently traded at $53.31, up $1.11, or 2.13%. They have traded in a 52-week range of $40.50 to $76.67. Volume today was 771,945 shares versus a 3-month average volume of 4,708,890 shares. The company’s trailing P/E is 6.54, while trailing earnings are $8.16 per share.
BHP Billiton Ltd. (NYSE:BHP): BHP shares recently traded at $77.27, up $1.97, or 2.62%. They have traded in a 52-week range of $62.54 to $104.59. Volume today was 538,650 shares versus a 3-month average volume of 4,314,020 shares. The company’s trailing P/E is 9.05, while trailing earnings are $8.54 per share.
Vale S.A. (NYSE:VALE): VALE shares recently traded at $24.14, up $0.64, or 2.72%. They have traded in a 52-week range of $21.14 to $37.25. Volume today was 2,448,876 shares versus a 3-month average volume of 20,013,900 shares. The company’s trailing P/E is 5.79, while trailing earnings are $4.17 per share.
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX): FCX shares recently traded at $40.33, up $1.03, or 2.62%. They have traded in a 52-week range of $28.85 to $61.35. Volume today was 3,024,155 shares versus a 3-month average volume of 24,299,900 shares. The company’s trailing P/E is 7.05, while trailing earnings are $5.72 per share.
Ivanhoe Mines Ltd. (NYSE:IVN): IVN shares recently traded at $21.40, up $1.22, or 6.05%. They have traded in a 52-week range of $12.11 to $30.03. Volume today was 506,265 shares versus a 3-month average volume of 3,582,140 shares. The company’s trailing earnings are $-0.70 per share.