Rio Tinto and Glencore Consider Spin-Off of Coal Assets Worth Billions
Written by Emily J. Thompson, Senior Investment Analyst
Source: Benzinga
- Coal Asset Spin-Off Discussion: Rio Tinto and Glencore are considering a spin-off of coal assets into a separately listed Australian entity, aimed at addressing complex investor base issues during their merger discussions, with these assets potentially valued at tens of billions of dollars on a standalone basis.
- Significant EBITDA Contribution: Glencore's coal operations contribute approximately 8% to the combined group's $45.6 billion EBITDA, highlighting their critical role in the merged entity's economic value while providing investors with clearer investment options.
- Strategic Importance of Copper: Copper demand is projected to rise by 50% by 2040, making the merger between Rio and Glencore a potential dominant force in global copper production, accounting for about 7% of global output and further solidifying their market position.
- Market Reaction and Advisory Support: Rio Tinto shares fell 1.54% in pre-market trading while Glencore shares rose 0.77%, indicating cautious market sentiment regarding the merger prospects, with Macquarie Capital advising Rio and Citi supporting Glencore.
Analyst Views on RIO
Wall Street analysts forecast RIO stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for RIO is 88.33 USD with a low forecast of 66.50 USD and a high forecast of 129.50 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
3 Analyst Rating
1 Buy
2 Hold
0 Sell
Moderate Buy
Current: 86.350
Low
66.50
Averages
88.33
High
129.50
Current: 86.350
Low
66.50
Averages
88.33
High
129.50
About RIO
Rio Tinto plc is a United Kingdom-based mining and materials company. It operates in over 35 countries, and its portfolio includes iron ore, copper, aluminum and a range of other minerals and materials. Its segments include Iron Ore, Aluminum, Copper, and Minerals. The Iron Ore segment includes iron ore mining and salt and gypsum production in Western Australia. Its iron ore operations in Pilbara comprise an integrated network of over 18 iron ore mines and four independent port terminals. The Aluminum segment includes bauxite mining, alumina refining, and aluminum smelting and recycling. The Copper segment includes mining and refining of copper, gold, silver, molybdenum, other by-products and licensing of extraction technologies. The Minerals segment includes mining and processing of borates, diamonds, iron concentrate and pellets from the Iron Ore Company of Canada, lithium and titanium dioxide feedstock.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
