please explain, page-27

ABN AMRO buy at support level $30

Trading Update: Rio Tinto Limited – Slow growth and debt cloud
Following BHP walking away from the RIO takeover, the stock has been punished on concerns over debt and gearing levels and RIO’s ability to sell assets. There has also been talk that RIO may need to come to the market to raise equity, however the company has denied that it will need to do so. RIO is now cutting production, sales and capex to preserve cash. While short term sentiment is negative, the stock looks like great value and is likely to present a great trading opportunity. Major support is at $30. Buy RIO in the low $30s through RIOWZC for a bounce. ABN AMRO target price $44.69.



ABN AMRO have downgraded near-term outlook for iron ore and coal and are factoring in a provisional 25% decline yoy in iron ore benchmark prices for the 2009/10 contract period and declines of 34-41% for metallurgical coal.



RIO has made only one formal announcement on cutting sales (iron ore). However, senior management have given press interviews to announce cutbacks in capital expenditure and aluminium production. As a result ABN AMRO have removed various projects completely (eg, Ma'aden) and deferred others by one to two years (eg, iron ore expansions in Australia, Brazil and Canada) pushing the NPV down 25% to $88.38.