rio tinto valuation is negative

Current Debt position is $65Bn AUD
current mkt cap is $53bn equity AUD

current net profit approx, will be $11bnAUD in 2008-2009(based on iron ore contract volumes)
Debt repayment required in 2009 is $14bn
shortfall -3bn AUD

Also they have numerous other debt, approx $51bn AUD remaining, of which about ANOTHER $8bn due up to 2012

Assuming metals, iron ore, coal all revert to low prices, RIO's profit will go to $5bn AUD NPAT approx, or possibly. IT will also have no growth in iron ore volumes to increase earnings. also assume they stop all capex ala OZZIE Limited

Approx p/e about 7 times 5bn earnings = $35bn. its not worth 10 times earnings, as their profits can decrease further.

If you value on an EV basis, the EV should be $35bn(7x Earnings). The current EV of RIO is $118bn AUD which is a massive joke, greater than the EV of BHP.

RIO Equity should be worth their EV(Enterprise Value), which is -35bn, or roughly -$28 a share.

add a bit more risk on, as its got legacy medical issues from the ridiculous number 75,000 employees at Alcan and associated packaging businesses(worthless), its worth about -$35 a share. These are exposed to the US economy and Rio is liable for potentially billions in medical costs and pensions to thousands of employees.

There are far too many risks in this sinking ship. Add this to the fact that many metals are horrendously oversupplied and baltic dry ship index(an indicator of bulk materials demand) is at 25 year lows. So they lose their earnings power and have the largest single debt package of any corporate listed entity in the world. The equity holders have been wiped out, and i'm prepared to admit its a negative value.

Avoid RIO - at all costs.