Rio Tinto (RIO)
Analyst: Paul Young, Deutsche Bank
Price target: A$83.50
Thursday’s close: $77.70
Reason: Grasberg stake sale increasingly likely
Comments: Freeport, as part of its recent Q4 conference call, highlighted that RIO and the government of Indonesia are in active negotiations over a potential sale of RIO’s stake in Grasberg and that they expect a resolution in 1H18. Our un-risked NPV valuation for Rio’s 40% stake in Grasberg is circa US$6 billion with EBITDA and cash flows picking up materially from 2022/23 as RIO’s share of production steps up to a full 40% and the underground mine hits...