Rio Tinto gains as Canadian aluminium assets impresses analysts
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The news: Rio Tinto shares gained at market open on the ASX after RBC Capital Markets analysts upgraded their price target on the mining giant.
The numbers: Rio shares rose 1.9% to $129.86 by 11am AEST, having added nearly 15% since January.
RBC lifted its price target from $125 to $127, and increased its long-term aluminium segment margin expectation from 26% to around 30%. RBC's analysts noted that Rio is investing in the aluminium business in a "disciplined manner" and plans to grow EBITDA and return on capital employed by five percentage points by 2030.
Rio's aluminium segment contributes around 15% to 18% of Rio's product EBITDA and makes up around 18% of its group net asset value, according to RBC.
The context: RBC's analysts took part in Rio's North American site visits, which showcased the company's hydro-powered aluminium and titanium dioxide assets in Canada.
They said they came away more "more positive" on the Canadian aluminium assets, expecting a "more constructive" future after a period of cost-cutting, rationalising assets and "intense competition" from Chinese capacity expansions.
What they said: "The Canadian aluminium assets are a key differentiator for Rio, in our view," RBC analysts said.
"The operations have scale and a clear competitive advantage and operate from a position of strength."
The source: RBC Capital Markets
