MARKETS SPECTATOR: Urging a more ruthless Rio

Citigroup says Rio Tinto's needs to offload more than its US nickel and copper mine in order to give the company a noticeable boost.

Rio Tinto has a way to go before it appeases Clarke Wilkins.

The Citigroup analyst, despite have a 'buy' recommendation on Rio shares, has been a notorious critic of the company spending plans and been urging a rapid sale of underperforming businesses.

Yesterday’s announcement by Rio that it was selling a US nickel and copper mine and mill for $US325 million has not impressed Wilkins. He says the sale price was “below our valuation”. The sale of the mine and mill may result in an additional $US500 million in cash for Rio this year but “it is not enough to move the needle”, says Wilkins.

What Rio needs to offload, says the analysts, is the Iron Ore Company of Canada, whose net present value Wilkins estimates at $US3.6 billion, and New South Wales copper mine Northparkes, which Wilkins values at $US770 million.

If these sales can be pulled off along with a sale of coal assets then “it raises the potential for capital management in early 2014”.

At 1106 AEST Rio shares had gained $1.37, or 2.7 per cent, to $52.94. The benchmark S&P/ASX200 Index was up 55.74, or 1.2 per cent, to 4751.50.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles