Rio Tinto

Rio Tinto’s chief executive, Tom Albanese, recently described the miner’s iron ore division as the world’s second best business after Apple’s iPad. Investors don’t seem to agree (incidentally, nor do we); Apple’s share price marches relentlessly higher, but Rio’s has been thumped. Since we recommended selling Rio stock in Why you should sell Rio Tinto on 29 Nov 10 (Sell – $83.65), the share price has fallen 30%. In the past three months alone, it has fallen 14%. Despite the savage price falls, Sam Walsh’s ill-considered boast isn’t completely without merit; last year Rio generated earnings before interest, tax, depreciation and amortisation...

Rio Tinto’s chief executive, Tom Albanese, recently described the miner’s iron ore division as the world’s second best business after Apple’s iPad. Investors don’t seem to agree (incidentally, nor do we); Apple’s share price marches relentlessly higher, but Rio’s has been thumped. Since we recommended selling Rio stock in Why you should sell Rio Tinto on 29 Nov 10 (Sell – $83.65), the share price has fallen 30%. In the past three months alone, it has fallen 14%. Despite the savage price falls, Sam Walsh’s ill-considered boast isn’t completely without merit; last year Rio generated earnings before interest, tax, depreciation and amortisation (EBITDA) of US$20bn from its iron ore division, a return on assets of 100%. The figure for BHP is just 50%.

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