rio targets based on pure mechanical , page-17

re: rio tinto targets $52 technical ( up in uk) Not looking too far fetched now ......



I Caught a report, which may have been added ( in error) to a broker website in which the firm has a tech target of $52 on Rio.

This would obviously assume some a similar capital reorganisation to BHP’s of last year. The off market buy back of excess capital.

RIO is the stock of 2005 – the management to date have been running a race for which the market has only just woken up to (– hence the 12% plus rise over Jan.)

That is a simple strategy – whilst global resources prices are hot RIO has been divesting over $US 1.4 Billion in non core assets. This places RIO at the table of any M&A activity with low debt and awash with capital.

Similar to FGL ( Fosters) it could announce an on market buy back to perk up the share market initially whilst dragging it out and striking while the iron is hot !

Xtrata’s Bid for WMC will fail – less than 1% of holders have replied and those are brain dead David Tweed fodder as the on market price is much higher – a friendly bid with RIO / BHP / Anglo ( three ugly sisters ) is much more likely – they will all keep their jobs under this strategy… IMO its RIO with a script / cash tie in.

RIO was at a 22% discount to the ASX and the Ave share price of BHPB – this is slowly correcting. Yesterday’s Q4 performance data was records across all business being at MAX CAPACITY as limited by shipping and transport to the docks. Hamersley in particular was pumping !

That all being said, the Nippon Iron ore price will be at a 43% premium to last year and RIO will be looking for a 60% plus increase in the coal contracts as it has the whip hand given a $US 125 spot price due to supply squeeze. The Japanese will have to move fast as the Korean and Chinese will not hesitate to lock out their rice munching colleagues.

So, RIO is in the box seat – has it been priced their ? In my view no.

23/2/2005 is the reporting date – that will tell the tale.


Singas

This is my view only – not to be construed as investment advice. Read the red.