By taking its borates business off the market over the weekend Rio Tinto has shown the market that its financial situation may not be as dire as previously thought, Fat Prophets’ head of mining and resources research Gavin Wendt told MINING DAILY.
“That is my interpretation of what they are saying,” he said.
“I would take it as encouraging that they have taken the asset off the market and I think it does reflect the company’s confidence in its financial position.
“I think the rest of the market has underestimated the financial position of Rio Tinto.”
Speculation that Rio’s financial position has strengthened comes as the company’s new chairman Jan du Plessis arrives in Australia to discuss the Chinalco investment deal with local shareholders.
Rio investors have been unhappy with the deal and are expected to demand amendments to its current structure, which is less appealing now that Rio Tinto’s share price has risen and commodity prices have also improved.
According to Wendt, the possibility of an enhanced financial position gives Rio a better slate of alternatives should problems arise with the Chinalco deal.
“It gives them options in the case that the deal doesn’t go through for whatever reason,” he said.
“Whether it gets knocked back by shareholders, or it gets knocked back by the FIRB, or if it gets knocked back by both, they have got alternatives.”
“An improved financial position does provide confidence for the Rio board if the Chinalco deal does not go ahead.”