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SWOT Analysis

Strength:
1. Global leader in extraction of aluminium and copper ore:
2. Has industry leading technology for extraction
3. Diversified business with an employee force of nearly 70,000
4. Strong brand presence across the globe
5. One of the leaders in iron ore, aluminium, diamonds.
6. Multiple Commodity Extraction: The materials industry has numerous swings in demand.
These changes can significantly affect materials prices, so a diversified miner or materials
business is optimal. Diversity evens out individual commodity swings.
7. Economies of Sale: More people can produce more goods and seek synergies between other
industries within a single country. Scale can also benefit brain power, because more people can
combine to produce better ideas
8. Use of latest technology reduce overall opex and sustaining capex
9. Company is internationally spread and well connected: if a business traveler needs to access
they money in another country, they can either bank with a company that has branches in that
country, or they'll have to work with a third party, which will increase the fees and lower their
productivity
Weakness:

1. Financial Condition: very high debt: company suffers from long term debt.
2. Operational inefficiencies due to government intervention.: abiding with government rules and
regulations, in addition with taxes and royalties by the government for eg:. in India add up to
62% of total opex.
3. Commodity wise revenue generation is abrupt, hence if the Pilbara project is affected it will
affect the company in worst way as it generates the maximum revenue for Rio Tinto.
4. Differences between the residents near mining area and Rio Tinto due to mining.
Opportunity:
1. Rising need of aluminium as replacement of iron: rio tinto is global leader when it comes to
aluminium production.
2. Opportunities to expand business in other territories.
3. Business diversification alongwith other international players.
Threats
1. Strict regulations being imposed on environmental and security issues
2. Volatility in the commodity market
3. Activist group pressuring governments to impose strict regulations
4. Government regulation taxes and royalties increase the cost of production adversly

Commodities Of Rio Tinto:


Revenue Generation:



Capital Allocation Strategy:

Inference Drawn From Study:
1. Target further cost reductions
2. Improve Productivity
3. Continue to improve capital allocation strategy
4. Preserve primary owned assets
5. Continue target debt reduction
6. Since Pilbara project returns maximum revenue, its production should be increased.
7. Effort should be made by Rio Tinto for welfare of people around mining area
8. Greater returns to shareholders should be targeted to safeguard future projects.
9. Effort should be made that equal revenue is generated from all commodities to ensure
company is not affected adversely due to fall in market price of one commodity.
10. Sustainable mining should be adopted to abide with government regulations and similar
approach should be acknowledged.