Rio Tinto not tempted by cheap mining assets

Valuations of mining assets are well down from recent peaks, but don’t expect Rio Tinto to be out and about among the bottom fishers.

Analysts who sat down with Rio Tinto CEO Tom Albanese at a roundtable this week came away with the impression that the Anglo-Australian miner is keeping its purse strings closed–at least for now.

“M&A would appear to be well off the agenda at the moment driven by constraint on capital and lack of opportunities that would meet Rio’s asset quality hurdles,” Citi analyst Clarke Wilkins said in a note to clients.

J.P.Morgan analyst Lyndon Fagan noted Rio had changed its tune from a previously stated near-term aim of focusing on medium-sized bolt-on acquisitions.

“The CEO noted today the focus is now on organic growth,” Mr. Fagan said, reiterating Rio’s determination to pick winners from within its existing project portfolio.

The broker said closures within Rio’s aluminum division looks likely, given the miner is considering all options for loss-making assets.

“We would not be surprised to see the Gove refinery shut near term, with a move to focus purely on bauxite,” Mr. Fagan said. J.P.Morgan has an Overweight recommendation and a price target of A$84 a share on Rio.

Credit Suisse – which has an Outperform recommendation and price target of A$70 a share on Rio – said earlier this week that the miner, without aluminum, compared well with BHP Billiton in terms of margins.

Citi has a Buy recommendation on Rio and a price target of A$80 a share. Rio shares closed Wednesday at A$55.10.