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Mar 15 Fév 2011 06:41
Equinox good fit for Rio Tinto
* From: The Australian
* February 15, 2011 1:19PM
RIO Tinto should consider African-focussed copper outfit Equinox Minerals in its hunt for new acquisitions, according to analysts.
RBS analyst Lyndon Fagan said Equinox, which has made a bid for Saudi copper play Citadel, was one of the few pure copper plays left.
“Equinox offers a potential acquirer the opportunity to gain exposure to Zambia through its Lumwana mine, along with a significant land position to undertake further exploration,” he said in a client note.
“The company remains one of the few pure copper plays out there that we believe would be a logical fit within Rio’s small-to medium-sized acquisition criteria.”
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Mr Fagan said he had estimated that Rio was generating around $US2 billion per month in operating cash flow versus Equinox’s market capitalisation of $US5.7bn.
“Further, grade decline across Rio’s existing operations suggests the company needs further projects in order to maintain production,” he said.
“With large tier one copper assets hard to come by, small yet high margin copper projects may now be part of Rio’s strategy to grow its copper business.”
The mining giant’s $US3.9bn bid for Mozambique-focussed Riversdale Mining illustrates that the company is prepared to grow further in Africa.
“We see Zambia as a lower risk region than Mozambique, which could mean a bid for Equinox may be easier to get over the line from a geopolitical risk point of view,” Mr Fagan said.
