Rio Tinto (RIO)

This and BHP Billiton (BHP-N) are on his radar screen, in part potentially for some of his dividend oriented funds. Draws a lot of revenue and EBITDA from iron ore. Many question the philosophy of the company, i.e. building more capacity in an oversupplied market, in an attempt to bring on more low cost supply, and driving out higher cost producers. This has been a huge overhang on iron ore. They are the dominant producers. Thinks the dividend is pretty safe and they can finance it for the next couple of years at current spot prices. 5.2% dividend yield.

Doesn’t think this is a good time to have a lot of money in commodities. Part of the problem with this company is that it is in the iron ore business and the companies are all fighting for market share regardless of profits. He doesn’t like that type of business.

International mining companies are still in a phase of asset disposition. It is going to be a while before they get earnings growth. Prefers Canadian mid-sized companies in copper, but even then only a small position.

If you own, he would suggest you consider lightening up. It is going to be a long time before stocks like this recover. There are too many headwinds in this space. Take advantage of the fact that you gained money on the currency and redeploy it into something that has more upside potential such as a technology company.

Most of the large mining sector made a bunch of acquisitions over the last few years at the absolute top of the market. This one was right up there. They are all suffering from write-downs. They are going to rein in their capital expenditures. When the cycle starts to do well, they will respond as well but he is not overly attracted to it.

Region is interesting. Saw a big move late last week. It will be a range-bound market for the next few months. Need to be a trader and not an investor.

New CEO. From a commodity point of view, you should think about how much more losses are going to come through, what is the earnings outlook for the mining category in general and how long the stock is going to take before it starts to run. Longer-term he likes the category. Because of losses you might see some downside in pricing, giving you an opportunity to enter at better levels. Prefers BHP Billiton (BHP-N) which has a better balance sheet and its exposure to iron ore and copper is a little better

Bought this because he thought the market was reflecting the iron ore/China situation much more reasonably. Very good assets. Can make money even at $70 a ton.

Good, global mining business over the long-term. Great assets. Diversified assets over many different countries. The challenge for any mining company today is the sentiment around China and slowing global growth.