rio tinto will move to predator from prey

A relevant article below regarding RIO in the future.

I have also noted a couple of articles recently mentioning that the Ranger mine may be up for sale - a refocus on Uranium mining at Rossing maybe? Sorry I cant find the articles.


LONDON, Feb 19 (Reuters) - Rio Tinto will move to predator from prey in the mining sector after its $12.3 billion deal with Chinalco, which will give it improved access to funding from China, an Asian equity manager said.

Bill Sung, who manages the $154.2 million Absolute Asia AM Pacific Rim Equities Fund, said the relationship with Chinalco provides a relatively quick and short-term fix to Rio's problems and also gives them a long-term strategic benefit.

"With Chinalco as the partner, Rio will have a clear advantage in accessing strong funding sources," he said earlier this week.

"This will help to reverse its position from prey to predator in the resources sector. Also, Rio will have a clear advantage in accessing the Chinese market."

As a result, Sung said he would maintain his overweight position to Rio Tinto. Both Rio Tinto and BHP Billiton feature in his top 10 holdings.

He said that, from a longer-term perspective, having Chinese involvement in the company does pose some threats to Rio and the rest of the resources sector, with China in all likelihood gaining access to inside knowledge about the company and possible influence on its negotiating positions.

However, he believes Rio will benefit from a better than expected outcome in the upcoming iron ore and coal negotiations and that China will experience an earlier than expected turnaround, which will help to stimulate the resources sector.


GOLD MINED

Sung also has 4 percent of his portfolio in gold miners, with Lihir Gold a top 10 holding.

He said he has increased his gold stock exposure since April 2008, as the gold miners' decision to close out their hedging positions means an upward movement in the price of gold will go straight to their bottom line.

Sung sees a Chinese recovery in the second quarter of this year, and is confident China can achieve 8 percent GDP growth this year.

Concern about rising unemployment, particularly in southern China, which is dominated by exporting manufacturers, would encourage the government to spend more, he said.

He also pointed to the effectiveness of the banking system in circulating credit: "The banks are being encouraged to lend and in January they lent about 1 trillion yuan ($146.3 billion)."

To benefit from this recovery theme, he holds Weichai Power <000338.SZ>, which he sees as a beneficiary of increased government spending in infrastructure.

Weichai is the largest manufacturer of diesel engines in China, for both construction equipment such as excavators, and heavy duty trucks.

He said that of all his markets, China offered the most value: "Relative to its historic valuation it is very cheap -- with a P/E multiple of about 9x." Against this, he sees 2009 earnings growth of 5 percent as realistic.

His main underweight is Australian financials such as banks, real estate investment trusts and insurers, due to a deterioration in the credit quality: "Globally we are not at all comfortable on banks -- we are expecting more rights issues."

Absolute Asia is an affiliate of Natixis Global Asset Management. Lipper data show the fund is down 51.73 percent in the 12 months to end-January 2009, and down 4.48 percent against its Lipper Global peer group of Asia Pacific ex-Japan funds over the same period. (Editing by Andrew Macdonald)

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