Morningstar Rating

Stock Research and Analysis

by Mark Taylor
Rio Tinto is a top-tier global miner along with BHP Billiton, Brazil's Vale, and U.K.-based Anglo American. A world-class asset base and capable management make Rio Tinto one of the few miners to earn more than its cost of capital through the commodity   Read more 

Bulls Say

Rio Tinto is one of the direct beneficiaries of the increasing appetite for natural resources in China.
Rio's cash flow base is diversified, and the company is less susceptible to the vagaries of the market than single-commodity producers are.
The company is run exceptionally well at the asset level and enjoys a broad portfolio of first-class, low-cost assets.
Growing producer concentration is slowly tipping pricing power away from the end user toward miners like Rio.
As staple commodities for developing nations, prices for iron ore and copper in particular are performing very strongly. Most of Rio's value derives from iron ore, aluminium and copper. Read more 

Bears Say

Sovereign risk heightened following Australia's introduction of the mineral resources rent tax.
The global economy is cooling off. Demand for natural resources in China may have peaked, and the Chinese economy could begin to slow.
Diversified miners' stocks always trade at discount valuations to pure plays. Investors interested in gaining exposure to a specific commodity would be better off investing in pure plays.
Rio is subject to the long-term supply/demand balance for metals, the major factor in determining its profitability. The firm is top-heavy in iron ore and needs more balance in its product mix.
Chinese mineral investment, for production rather than profit's sake, risks eroding some of the limited pricing power mining companies have more recently won. Read more 

Management

We assign a standard stewardship rating to Rio. Sam Walsh became CEO in January 2013, taking over from Tom Albanese who fell on his sword following an unprecedented USD 14 billion of writedowns of aluminium and coal assets. The 63 year old Walsh was   Read more 

Profile

Rio Tinto searches for and extracts a variety of minerals worldwide, with the heaviest concentrations in North America and Australia. Major products include aluminum, copper,  Read more 

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