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Still got some money to invest safely? GICs look interesting again

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Stay alert if you’re an investor who favours the safety of GICs.

Financial markets are revising the outlook for inflation, and in turn, interest rates. Keep your eye on Government of Canada bond yields to follow the action for rates on guaranteed investment certificates.

The yield on the five-year Canada bond, an influence on five-year GICs, jumped this week to 3.4 per cent early Friday from 3 per cent a week earlier. This sizable move by bond market standards was brought to you by the April inflation report from Statistics Canada. It showed that the year-over-year inflation rate last month edged up to 4.4 per cent from 4.3 per cent in March.

Discouraging is the word to describe this change, given that inflation has been falling hard since reaching 8.1 per cent in June 2022. Financial markets had expected inflation to be around 3 per cent late this year and rate cuts to start happening around that time or in early 2024. Now, bets for a rate increase this summer are piling up.

Bonds have fallen in price in reaction to this changed outlook, which is why yields are up for government and corporate bonds. Expect GICs to follow if bond yields hold at recent levels.

The highest GIC rates currently are for one-year terms – expect 4.75 per cent to 5 per cent from alternative banks and trust companies and 5 per cent or slightly more from deposit brokers.

Five-year GIC rates are generally in the 4.4 to 4.75 per cent range. We could see these rates move higher if five-year bond yields hold and the spring housing market stays hot. GIC issuers sometimes juice their rates a bit to attract money for mortgage lending.

Short-term GIC rates are usually significantly lower than long-term rates. We’re seeing the opposite now because markets see potential for interest rates to rise in the near term and then fall back in the medium term as the economy slows and possibly lapses into recession.

Inflation will eventually fall to the preferred range around 2 to 3 per cent. When it does, GICs that lock in rates in the 4 per cent range and higher will look darn fine in your portfolio.

— Rob Carrick, personal finance columnist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Brookfield Property Partners (BPYP-PR-A-T) Real estate companies with exposure to office buildings are struggling amid high vacancy rates and an uncertain future as many people continue to work from home. If buying the beaten-up units of real estate investment trusts at the depths of despair sounds too risky, here’s another approach: Take a look at the preferred shares of Brookfield Property Partners, which can yield more than 10 per cent right now. There’s certainly risk here, but a compelling opportunity too, says David Berman.

The Rundown

Don’t be fooled by gold’s glitter

Time to buy gold? As the legendary metal nears all-time highs – and headlines project more of the same ahead – it may seem intriguing. But beware: Gold is more volatile than stocks, with lower long-term returns than bonds. It requires impeccable market timing – otherwise, it is a drag. If you can’t time stocks, which rise far more often than fall, don’t try gold, argues billionaire investor Ken Fisher.

U.S. debt ceiling deal could stall safety flight fueling megacap rally

A potential deal to lift the U.S. debt ceiling could spur money managers to pare holdings in the massive technology and growth stocks that have been havens this year and shift into the rest of the market, reports Reuters’ David Randall.

How to beat the pros, Part 5: Two stocks you never heard of that fit our investing strategy

Portfolio managers Jason Del Vicario and Steven Chen are back with the next instalment of their beat the pros series. This time, they look at two little-known stocks that they think are going to do very well in the years ahead.

Why is the U.S. dollar so strong again?

If investors agree on one thing this year, it’s that the dollar is going to fall. That’s made the greenback’s 2% bounce over the last month particularly confusing. Harry Robertson of Reuters explains what’s behind the dollar’s recent rally.

Investors favour Japan’s rising sun over China’s fading star

Long Japan, short China. If there is a general macro, relative value trade playing out right now, it might be that as the contrasting fortunes of Asia’s economic and financial behemoths become starker by the day, as Reuters’ Jamie McGeever reports.

Others (for subscribers)

Number Cruncher: 10 U.S. stocks with attractive fundamentals in hot sectors

Number Cruncher: 10 mining stocks facing climate-change risk

Number Cruncher: 20 undervalued large cap stocks on the TSX

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Thursday’s Insider Report: Million-dollar purchases in these two dividend stocks

Globe Advisor

Why this $1.75-billion money manager has more than half of his portfolio in cash

Why early RRIF withdrawals don’t work for most retirees

Record buyback spree attracts shareholder complaints

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis.

Ask Globe Investor

Question: What is the best way to reinvest dividends?

Answer: Reinvesting dividends is one of the most effective ways to build wealth over the long run. That’s because it harnesses the power of compound growth, which is an investor’s greatest ally.

In the old days, reinvesting dividends was a cumbersome process. You had to enroll your shares in the company’s dividend reinvestment plan (DRIP), which required obtaining the shares certificates from your broker – for which there was a fee – and registering them in your name with the company’s transfer agent. When it came time to sell, you had to deliver your shares to a broker to carry out the transaction.

It was a pain in the behind, but the benefit of these traditional company-operated DRIPs was – and still is – that they support fractional share purchases. That means every penny of your dividend gets reinvested. Even as electronic record-keeping has replaced paper share certificates at many companies, these DRIPs still operate in much the same way.

Nowadays, investors have many more options for reinvesting dividends.

Most discount brokers now offer their own in-house DRIPs. The advantage of these plans is that you don’t have to register the shares in your own name – they stay with the broker – and you have more control over the timing and price when you sell. The downside is that most broker-operated plans only allow you to purchase whole shares. So, for example, if you receive $50 worth of dividends and the shares you’re reinvesting in trade at $40, you’ll acquire one additional share and the remaining $10 will sit in cash. That means you won’t get the full benefit of compounding.

The good news is that there are some easy workarounds.

One solution is to sweep the residual cash into a low-cost index mutual fund periodically. Mutual funds don’t charge commissions on purchases, so it’s a cost-effective method. What’s more, mutual funds allow partial unit purchases and reinvest their dividends by default, so they make the most of compounding. The disadvantage of this method is that mutual funds typically charge relatively high management expense ratios (MERs).

But there’s a way around that, too. A few years ago, with the arrival of commission-free exchange-traded funds at many brokers, I stopped using mutual funds to soak up cash and turned to ultra low-cost ETFs instead. For example, one of the ETFs I use is the BMO S&P/TSX Capped Composite Index ETF (ZCN), which has an MER of just 0.06 per cent. There are many other low-cost ETFs out there; I suggest you check to see if your broker supports commission-free ETF trades and, if so, which ones qualify.

I still occasionally buy shares of individual companies – and pay a commission – if I have a chunk of cash sitting around and a stock looks especially attractive. But the simplicity and cost-effectiveness of sweeping cash into a low-cost ETF is appealing. It makes the most of compounding, with the added benefit of diversification.

–John Heinzl (E-mail your questions to jheinzl@globeandmail.com)

What’s up in the days ahead

Take a bow readers – so far, you’re faring much better than us Globe staff in our recently launched investing club. Ian McGugan will provide an update.

More drama on the horizon: World market themes for the week ahead

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

Compiled by Globe Investor Staff

 

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Investment regulator imposed $14M in enforcement penalties in latest fiscal year

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TORONTO — Canada’s investment product regulator says it imposed more than $14 million in fines and other financial enforcements in its last fiscal year.

The Canadian Investment Regulatory Organization (CIRO) says the total also includes imposed costs and the forced return of ill-gotten profits.

The regulator says it also ordered suspensions and permanent prohibitions in a significant proportion of proceedings against individuals.

Enforcement efforts included a $2 million fine against Fortrade Canada for recommending a high-risk product to unsophisticated retail clients, and a $1.7 million fine and permanent ban on securities-related business against Paul Walker for a range of misconduct including soliciting more than $1.5 million in investments for an outside business activity.

CIRO was created at the start of 2023 through a combination of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada.

The new self-regulatory organization says it is focused on harmonizing its regulatory approach to create more consistency and timeliness with enforcement action.

This report by The Canadian Press was first published July 16, 2024.

The Canadian Press

 

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Conditions on Simandou investment now satisfied

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LONDON, July 15, 2024–(BUSINESS WIRE)–All conditions have now been satisfied for Rio Tinto’s investment to develop the Simandou high-grade iron ore deposit in Guinea, including the completion of necessary Guinean and Chinese regulatory approvals. The transaction is expected to complete during the week of 15 July 2024.

Along with the recent approval by the Board of Simfer1, this allows Simfer to invest in and fund its share of co-developed rail and port infrastructure being progressed in partnership with Winning Consortium Simandou2 (WCS), Baowu and the Republic of Guinea.

More than 600 kilometres of new multi-use trans-Guinean railway together with port facilities will allow the export of up to 120 million tonnes per year of mined iron ore by Simfer and WCS from their respective Simandou mining concessions in the southeast of the country3. Together, this will be the largest greenfield integrated mine and infrastructure investment in Africa.

Rio Tinto Executive Committee lead for Guinea and Copper Chief Executive Bold Baatar said: “We thank the Government of Guinea, Chinalco, Baowu and WCS for their partnership in reaching this milestone towards developing the world class Simandou project.

“Simandou will deliver a significant new source of high-grade iron ore that will strengthen Rio Tinto’s portfolio for the decarbonisation of the steel industry, along with trans-Guinean rail and port infrastructure that can make a significant contribution to the country’s economic development.”

Under the terms of the transaction, Simfer will acquire a participation in the WCS project companies constructing rail and port infrastructure, commit to perform a portion of the construction works itself and commit to funding its share of the overall co-developed infrastructure cost, in an aggregate amount of approximately $6.5 billion (Rio Tinto share approximately $3.5 billion)4.

Chalco Iron Ore Holdings Ltd (CIOH) has now paid its share of capital expenditures incurred or required by Simfer to progress critical works up to completion. A first payment of approximately $410 million, for expenditures until the end of 2023, was made on 28 June 2024, and a second payment of approximately $575 million, for 2024 expenditures, was made on 11 July 2024. These amounts settle all expenditures incurred up to date.

The co-developed infrastructure capacity and associated cost will be shared equally between Simfer, which will develop, own and operate a 60 million tonne per year5 mine in blocks 3 and 4 of the Simandou Project, and WCS, which is developing blocks 1 and 2.

Under the co-development arrangement, Simfer and WCS will deliver separate infrastructure scopes to leverage expertise. Simfer will construct the approximately 70 kilometre Simfer spur rail line and a 60 million tonne per year transhipment vessel (TSV) port, while WCS will construct the dual track approximately 536 kilometre main rail line, the approximately 16 kilometre WCS spur rail line and a 60 million tonne per year barge port.

Once complete, all co-developed infrastructure and rolling stock will be transferred to and operated by the Compagnie du Transguinéen (CTG) joint venture, in which Simfer and WCS each hold a 42.5% equity stake and the Guinean State a 15% equity stake6.

First production from the Simfer mine is expected in 2025, ramping up over 30 months to an annualised capacity of 60 million tonnes per year5 (27 million tonnes Rio Tinto share). The mine will initially deliver a single fines product before transitioning to a dual fines product of blast furnace and direct reduction ready ore.

Simfer’s capital funding requirement for the Simandou project as a whole is estimated to be approximately $11.6 billion, of which Rio Tinto’s share is approximately $6.2 billion, broken down as follows.

US dollars in billions (nominal terms) Simfer

capex

  Rio Tinto
share
Mine and TSVs, owned and operated by Simfer
Development of an initial 60Mt/a mine at Simandou South (blocks 3 & 4), to be constructed by Simfer $5.1 $2.7
Co-developed infrastructure, owned and operated by CTG once complete
Simfer scope (funded 100% by Simfer during construction)

Rail: a 70 km rail-spur from Simfer mine to the mainline, including rolling stock
Port: construction of a 60Mt/a TSV port

$3.5 $1.9
WCS scope (funded 34% by Simfer during construction)

Port and rail infrastructure including an approximately 552 km trans-Guinean heavy haul rail system, comprised of a 536 km mainline and a 16 km WCS rail spur

$3.0 $1.6
Total capital expenditure (nominal terms) $11.6 $6.27

Rio Tinto’s share of expected capital investment remaining to be spent from 1 January 2024 is to be $5.7 billion. Rio Tinto’s expected funding requirements for 2024 and 2025 are included in its share of capital investment guidance for this period, with project funding expected to extend beyond this timeframe.

Further details on the Simandou project can be found in the 2023 Investor Seminar presentation at https://www.riotinto.com/en/invest/investor-seminars.

As Chinalco, Baowu, China Rail Construction Corporation and China Harbour Engineering Company are Chinese state-owned entities, and given Chinalco indirectly holds 11.2% of shares in the Rio Tinto Group, they, and WCS, may be considered to be associates of a related party of Rio Tinto for the purpose of the UK Listing Rules. Rio Tinto’s funding commitment pursuant to the infrastructure co-development arrangement (Rio Tinto share $3.5bn) is a smaller related party transaction for the purposes of Listing Rule 11.1.10R and this announcement is, therefore, made in accordance with Listing Rule 11.1.10R(2)(c).

___________________________
1 Approval has been granted by the Board of Simfer Jersey Limited, a joint venture between the Rio Tinto Group (53%) and Chalco Iron Ore Holdings Ltd (CIOH) (47%), a Chinalco-led joint venture of leading Chinese SOEs (Chinalco (75%), Baowu (20%), China Rail Construction Corporation (2.5%) and China Harbour Engineering Company (2.5%)). Simfer Infraco Guinée S.A.U. will deliver Simfer Jersey’s scope of the co-developed rail and port infrastructure, and is, on the date of this notice, a wholly-owned indirect subsidiary of Simfer Jersey Limited, but will be co-owned by the Guinean State (15%) after closing of the co-development arrangements. Simfer S.A. is the holder of the mining concession covering Simandou Blocks 3 & 4, and is owned by the Guinean State (15%) and Simfer Jersey Limited (85%).
2 WCS is the holder of Simandou North Blocks 1 & 2 (with the Government of Guinea holding a 15% interest in the mining vehicle and WCS holding 85%) and associated infrastructure. WCS was originally held by WCS Holdings, a consortium of Singaporean company, Winning International Group (50%) and Weiqiao Aluminium (part of the China Hongqiao Group) (50%). On 19 June 2024, Baowu Resources completed the acquisition of a 49% share of WCS mine and infrastructure projects with WCS Holdings holding the remaining 51%. In the case of the mine, Baowu also has an option to increase to 51% during operations. After Closing, Simfer will hold 34% of the shares in the WCS infrastructure entities during construction with WCS holding the remaining 66%.
3 WCS holds the mining concession for Blocks 1 and 2, while Simfer S.A. holds the mining concession for blocks 3 and 4. Simfer and WCS will independently develop their mines.
4 A true-up mechanism will apply between Simfer and WCS to equalise most of their costs of constructing the co-developed rail and port infrastructure. The figures shown here are pre-equalisation.
5 The estimated annualised capacity of approximately 60 million dry tonnes per annum iron ore for the Simandou life of mine schedule was previously reported in a release to the Australian Securities Exchange dated 6 December 2023 titled “Simandou iron ore project update“. Rio Tinto confirms that all material assumptions underpinning that production target continue to apply and have not materially changed.
6 Ownership of the rail and port infrastructure will transfer from CTG to the Guinean State after a 35 year Operations Period, with Simfer retaining access rights on a non-discriminatory basis and at least equivalent to all Third Party Users.
7 By the end of 2023, Rio Tinto spent $0.5 billion (Rio Tinto share) to progress critical path works. Rio Tinto’s share of expected capital investment remaining to be spent from 1 January 2024 was $5.7 billion.

This announcement is authorised for release to the market by Andy Hodges, Rio Tinto’s Group Company Secretary.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240621382292/en/

Contacts

Please direct all enquiries to media.enquiries@riotinto.com

Media Relations,
United Kingdom
Matthew Klar
M +44 7796 630 637
David Outhwaite
M +44 7787 597 493

Media Relations,
Australia

Matt Chambers
M +61 433 525 739
Jesse Riseborough
M +61 436 653 412
Alyesha Anderson
M +61 434 868 118
Michelle Lee
M +61 458 609 322

Media Relations,
Americas

Simon Letendre
M +1 514 796 4973
Malika Cherry
M +1 418 592 7293
Vanessa Damha
M +1 514 715 2152

Investor Relations,
United Kingdom
David Ovington
M +44 7920 010 978
Laura Brooks
M +44 7826 942 797

Investor Relations,
Australia

Tom Gallop
M +61 439 353 948
Amar Jambaa
M +61 472 865 948

Rio Tinto plc
6 St James’s Square
London SW1Y 4AD
United Kingdom
T +44 20 7781 2000
Registered in England
No. 719885

Rio Tinto Limited
Level 43, 120 Collins Street
Melbourne 3000
Australia
T +61 3 9283 3333
Registered in Australia
ABN 96 004 458 404

riotinto.com

Category: Simandou

 

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BlackRock Pulls Ad Featuring Trump Rally Shooter Thomas Matthew Crooks

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A screengrab of Thomas Crooks from the BlackRock ad that aired in 2022.

Thomas Matthew Crooks, the 20-year-old who shot at former president Donald Trump at a rally in Pennsylvania, had briefly appeared in a 2022 advertisement for BlackRock Inc, the world’s largest money manager.

The ad, filmed at the Bethel Park High School in Pennsylvania, featured Crooks and several other unpaid students in the background, said the investment giant in a statement. Crooks graduated from the school in 2022.

BlackRock said it has pulled the ad but the video will be available to authorities. The ad, however, is being widely shared by social media users.

“The assassination attempt on former President Trump is abhorrent. We’re thankful former President Trump wasn’t seriously injured, and thinking about all the innocent bystanders and victims of this awful act, especially the person who was killed,” the company added in its statement.

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BlackRock, whose earnings figures are expected today, has faced scrutiny after shooting incidents since some of its index funds own shares in gunmakers.

Trump Assassination Attempt

Trump survived an assassination attempt on Saturday after a gunman opened fire at him at a rally in Pennsylvania ahead of the Presidential elections. The attack left him with a bloodied face as the former president said the bullet pierced his “upper part of right ear”.

Latest and Breaking News on NDTV

A bystander died in the attack while shielding his family and Crooks – a registered Republican – was shot dead by a Secret Service sniper.

Trump, whose Republican candidature will be finalised today, shared a message of unity after the attack and said Americans must not allow “evil to win”. “It was God alone who prevented the unthinkable from happening,” he said on social media.

Biden, too, appealed to the nation to “lower the political temperature” in a rare Oval Office address. “Politics must never be a literal battlefield, God forbid a killing field,” he said.

The US markets are expecting Trump trades to gain momentum after the attack. It has already been pinning hopes for the return of Republicans, especially after Biden’s poor performance in last month’s debate. Those trades are likely to take deeper hold as the attack sparks a wave of sympathy and support for Trump.

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