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Rio Tinto (RIO) Invests in Aluminum Recycling Centre in Arvida

·4 min read

Rio Tinto plc RIO is investing $29 million in building a new aluminum recycling facility at its Arvida Plant in Saguenay-Lac-Saint-Jean, Quebec, Canada. The hub will expand RIO’s offering of low-carbon aluminum products catering to customers in the automotive, packaging and construction markets.

This strategic move will make Rio Tinto the first primary aluminum producer in North America to incorporate recycled post-consumer aluminum into aluminum alloys. RIO will be able to cash in on growing demand for responsible and traceable products.

Construction of the plant will begin in October 2022 and the recycling center is expected to be operational in the second quarter of 2024. It will have an initial annual capacity of 30,000 tons.

A remelting furnace equipped with regenerative burners and an automated scrap loading system will be installed in an existing building at the Arvida plant. Aluminum scrap sourced from used vehicles and construction materials will be melted and the recycled content will be used in aluminum billets at the Arvida smelter as well as in other products at Rio Tinto's Quebec facilities.

The project is expected to generate $23 million of economic benefits in Quebec. This marks a step forward in RIO’s efforts toward achieving its sustainability targets.

Rio Tinto produces aluminum of excellent quality with minimal carbon footprint in the world. Its Canadian operations average in the first decile of the industry cost-curve and produce aluminum using clean, renewable hydropower. RIO has set emission-reduction targets in its absolute Scope 1 and 2 of 15% by 2025 and 50% by 2030, respectively, compared with its 2018 equity baseline.

RIO remains committed to reaching the net-zero mark by 2050. To that end, Rio Tinto will spend $7.5 billion between 2022 and 2030. It will also make an incremental operating expenditure of approximately $200 million per year through 2030 on building new capabilities, taking energy-efficiency initiatives, and research and developmental activities.

Rio Tinto recently reported revenues of $29.8 billion in the first half of fiscal 2022 (ended Jun 30, 2022), down 10% from the comparable period’s level in the last fiscal year. Underlying earnings per share plunged 29% year over year to $5.32. This reflected lower commodity prices, impact of higher energy prices on its operations and steep inflation rates on its operating costs and closure liabilities.

RIO maintains its guidance for fiscal 2022 iron ore shipments at 320-335 Mt. Management expects Pilbara iron ore unit cash costs in the range of $19.50-$21.00 per ton for the full fiscal. Aluminum production is expected between 3 Mt and 3.1 Mt for the full fiscal.

Price Performance

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In the past year, shares of Rio Tinto have fallen 21.1% compared with the industry’s decline of 15.7%.

Zacks Rank & Key Picks

Rio Tinto currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the basic materials space are Albemarle Corporation ALB, Daqo New Energy Corp. DQ and Sociedad Quimica y Minera de Chile S.A. SQM.

Albemarle has a projected earnings growth rate of 425.7% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 67.9% upward in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. ALB has a trailing four-quarter earnings surprise of 24.2%, on average. ALB has gained around 20% in a year and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy, currently flaunting a Zacks Rank of 1, has an expected earnings growth rate of 177.5% for the current year. The Zacks Consensus Estimate for DQ's earnings for the current fiscal year has been revised 20.8% upward in the past 60 days.

Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing the mark in one, the average beat being 10.8%. DQ has gained around 11% over a year.

Sociedad has a projected earnings growth rate of 517.6% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 33.4% upward in the past 60 days.

Sociedad’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, missing the mark in the remaining two, the average beat being 28.2%. SQM has rallied roughly 101% in a year. SQM carries a Zacks Rank #2 (Buy) at present.

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Rio Tinto PLC (RIO) : Free Stock Analysis Report
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