A BMO Capital Markets report discussed the ways
this global firm might use the new funds.
In a Dec. 21 research note, BMO Capital Markets analyst Edward Sterck
reported that Rio
Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) closed on the sale of
its 40% interest in Grasberg for $3.5 billion through a series of
transactions with the Indonesian government and Freeport McMoRan, and that
the sale could result in increased shareholder returns.
Were Rio Tinto to return all of the proceeds to shareholders, via a
special dividend or another share buyback program, Sterck noted, it would
increase the 2019 return to about 11.3% from 7%, as estimated by BMO. This
compares to the 12% expected at the end of 2018. The analyst pointed out that
the company already has significant share buyback underway, which would
account for about 30% or US$1.8 billion of that projected 7% return in 2019.
Rio Tinto, however, may opt to use some or all of the new funds for
another purpose, such as building up its treasury for acquisitions or capital
projects, Sterck highlighted. For one, it may "look to add copper assets
through acquisitions."
The company will announce its intent for the US$3.5 billion when it
reports its full year 2018 financial and operating results on Feb. 27, 2019.
BMO has an Outperform rating and a £46 per share target price on Rio
Tinto, whose stock is currently trading at around £37.62 per share.
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Disclosures from BMO Capital Markets, Rio Tinto, December 21, 2018
IMPORTANT DISCLOSURES
Analyst's Certification
We, David Gagliano and Edward Sterck, hereby certify that the views expressed
in this report accurately reflect our personal views about the subject
securities or issuers. We also certify that no part of our compensation was,
is, or will be, directly or indirectly, related to the specific recommendations
or views expressed in this report.
Analysts who prepared this report are compensated based upon (among
other factors) the overall profitability of BMO Capital Markets and their
affiliates, which includes the overall profitability of investment banking
services. Compensation for research is based on effectiveness in generating
new ideas and in communication of ideas to clients, performance of
recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets
Limited are not registered as research analysts with FINRA. These analysts
may not be associated persons of BMO Capital Markets Corp. and therefore may
not be subject to the FINRA Rule 2241 restrictions on communications with a
subject company, public appearances and trading securities held by a research
analyst account.
Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for
products or services other than investment banking services within the past
12 months from Rio Tinto.
Disclosure 6C: Rio Tinto is a client (or was a client) of BMO Nesbitt Burns
Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate
within the past 12 months: C) Non-Securities Related Services.
Disclosure 19: BMO Nesbitt Burns Inc. ("BMO NBI") is acting as
financial advisor to China National Uranium Corporation Limited. in
connection with its proposed acquisition of 68.62 per cent stake in Rossing
Uranium Limited from Rio Tinto. BMO NBI will be paid a fee contingent on the
successful completion of the transaction. BMO NBI follows information control
procedures which prevent its research analysts who are issuing research from
having access to non-public information received by BMO NBI's investment
banking personnel in connection with the transaction. Accordingly, it is
possible that individual employees at BMO NBI may have material non-public
information or opinions which are not included in, and may not be consistent
with, the information and advice in this research report.
For Important Disclosures on the stocks discussed in this report,
please click here.
