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Rio Tinto upgraded by JP Morgan amidst ‘strategic limbo’

“Strategic stasis means M&A tail risks are eliminated and capex is highly transparent."

Rio Tinto PLC - Rio Tinto upgraded by JP Morgan amidst ‘strategic limbo’

The unscheduled departure of Rio Tinto PLC’s chief executive Jean-Sébastien Jacques, amidst controversy, has left the major miner in a strategy limbo that is likely to last more than a year, according to JP Morgan, which nonetheless today delivers an upgrade to ‘overweight’.

JP Morgan noted that Rio shares rose by 125% during Jean-Sébastien Jacques’ tenure, outperforming BHP Billiton by around 30% and he has left the miner with a “best-in-class balance sheet”.

READ: Rio Tinto chief executive exits over aboriginal site destruction

Analyst Dominic O’Kane pointed to some upside to Rio’s imminent holding pattern given the current backdrop of uncertainty.

“Strategic stasis means M&A tail risks are eliminated and capex is highly transparent in a ~$6-7bn range for 2020-22 due to a lack of projects,” he said.

He noted that Rio’s cash flow is now ringfenced for dividends, meanwhile, the US investment bank has a bullish view on iron ore. More broadly, JPM has a bullish stance on mining generally and pointed to supportive policy in China.

JPM sets a £63.50 price target to go with its new ‘overweight’ rating.

Elsewhere, Barclays said it has become “incrementally more bullish” on the Chinese steel and accordingly upgraded its view of Rio to ‘equal weight’.

In London, RIO shares were up 135p or 2.7% to change hands at £51.33 in Tuesday mornings deals.

Quick facts: Rio Tinto PLC

Price: 4760 GBX

LSE:RIO
Market: LSE
Market Cap: £59.37 billion
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