$150 000 in Rio Tinto Ltd (RIO) @ $74.84= 2 004 shares $50 000 in Newcrest Mining Ltd (NCM) @ $21.28= 2 349 shares $50 000 in Macarthur Coal Ltd (MCC) @ $4.55= 10989 shares $50 000 in Fortescue Metals Group (FMG) @ $18.05= 2770 shares Total: $300 000
2004 shares inRIO@ $90.91 = $182 183 .64
2359 shares in NCM@ $22.20 = $52 369.80
10989 shares in MCC@ $5.27 = $57 912.03
2770 shares in FMG@ $34.45 = $95 426.50
Total: $387 891.97
Reasons For Choosing This Portfolio:
I decided to begin with 50% of my portfolio ($150000) invested in Rio Tinto Ltd, being the second largest multinational mining company in the world. Having established its presence in Australia over 40 years ago, I felt that this would be a secure major investment, with its diverse interests (outlined below) and a past history of strong performance against the ASX50 index. I similarly wanted to invest in Xstrata, however it is not listed on the ASX.
Of the remaining $150 000, $50 000, or 17% of my initial capital each went towards Newcrest Mining Ltd (Gold), Macarthur Coal Ltd (Coal) and Fortescue Metals Group (Iron). All of these companies appeared to have strong backgrounds with the potential for further growth in the near future. In particular, Fortescue looked to be a strong mover with iron ore prices doubling in the recent past.
In this way, I thus rounded out my portfolio with 50% in one major player in the industry representing varied interests, and the remaining 50% split evenly between interests in gold, coal and iron. Due to this split, I believed any negative fluctuations in specific base commodity prices would only affect a small section of my portfolio, minimising the loss.
Rio Tinto Limited:
Originally formed in 1873, Rio Tinto is the world’s second largest minerals company. “Its activities span the world but are strongly represented in Australia (15 current operations/prospects) and North America. There are also significant businesses in South America, Asia, Europe and southern Africa.”1 Notable operations within Australia:
• Full ownership of the Hamersley Iron mines (WA), producing 79 208 000 tonnes/year • 53% share in Robe River Iron (WA), 52 932 000 tonnes/year • 100% in Argyle Diamond (WA), 29 078 000 carats/year
• 80% in Northparkes Copper (NSW), 83 300 tonnes/year
• 75.7% in Hunter Valley Coal (NSW), 12 024 000 tonnes/year
Notable factors affecting stock:
• Strong base metal prices causing continued rise
• Rumours of a $100bn takeover bid by BHP Billiton resulted in a price leap (09/05/07) • Reduction in price following the end of the rumours
Macarthur Coal Limited:
Macarthur Coal, listed on the ASX in 2001, produces both metallurgical and thermal coal. “Macarthur Coal's principal product is pulverised coal injection coal (PCI) for the production of steel. Macarthur Coal is a key supplier of PCI coal to Asia, Europe and the Americas, providing approximately 44% of the low volatile PCI coal exported from Australia.”2
It has interests in two open-cut coal mines: the Coppabella Mine (annual production: 4 560 000 tonnes) and the Moorvale Mine (2 292 000 tonnes/year), in Queensland’s Bowen Basin. It also has 5 further mining projects in development, slated to be complete by 2010.
Notable factors affecting stock:
• Exploratory activities during March hampered by wet weather, preventing drilling • Production issues, substantial rainfall & shipping congestion at Dalrymple Bay, leading to reduced sales target of 3.7Mt • April: Analysts cite resurging demand in metallurgical (PCI) coal
Newcrest Mining Limited:
Newcrest currently has five operating gold mines, shaped by a strategy of developing large, long life mines or smaller high margin mines, which are low on the cost curve. These are:
• Ridgeway, NSW @ 390 000 ounces of gold...