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Rio’s revamp could set up $9B BHP-style spinoff, analyst says

Jun. 22, 2016 12:45 PM ETRio Tinto Group (RIO) StockRIOBy: Carl Surran, SA News Editor3 Comments
  • Rio Tinto (RIO +0.8%) appears to be placing ~$9B of unwanted assets from coal and uranium to Canadian iron ore into a single basket ready to spin off, Bernstein analyst Paul Gait says.
  • Rio's shakeup into four product groups includes a new Energy and Minerals segment that features coal and uranium mines, salt, borates and titanium dioxide businesses, and Rio’s Iron Ore Co. of Canada unit, which Gait says "seems like a portfolio of unwanted assets that could be ready for a spinoff [and] looks a lot like the South32 assets previously in BHP’s portfolio."
  • RBC analyst Tyler Broda agrees that Rio will hold higher quality assets in some of its other divisions but is cautious on a possible spinoff, noting Rio’s reliance on iron ore for earnings and that, there may be “benefits from maintaining some of these other potentially counter-cyclical commodities like uranium.”

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