Rio Tinto Limited (RIO) is one of the world’s largest international mining groups, involved in every stage of metal and mineral production, producing aluminium, copper, diamonds, coal, ore, uranium, gold and industrial minerals (borates, titanium dioxide, salt, talc, zircon). About 85% of assets are located in Australia and North America, with other operations in more than 50 countries in multiple continents.
Rio Tinto’s strategy is to focus on large-scale, long-life, and low-cost mining operations, and to invest in maintaining competitive positions. The company constantly seeks new sources of advantage to institutionalise in ways that smaller competitors cannot easily replicate.
The reduction in debt through a combination of a rights issue, cost reduction and increased commodity prices has supported their share price from a low of just over $30 to around $72. The Price Earnings Ratio of RIO is currently just under 12 times which compares favourably with BHP Billiton at around 17 times.
In our view, the inclusion of RIO Tinto into a portfolio would more than likely be to complement existing exposure to BHP Billiton. For those of us that are a little more aggressive, you may look to take a greater exposure to RIO Tinto. On a quantitative basis, RIO Tinto appears to be more attractively valued than BHP Billiton albeit with a greater level of risk.
For further information, or indeed if you would like to discuss the stock in greater depth and how it would fit into your portfolio, please do not hesitate to contact our office on (03) 9830 0366.
This informaion does not take into account the objectives, financial situation or needs of any person. Before making an investment decision, you should consider, with assistance of your financial adviser, whether it is appropriate in light of your particular objectives, financial situation and needs.