Has Rio Tinto narrowed the gap with BHP Billiton?

By Uwear

BHP has held the title of the world’s largest miner since merging with Billiton back in 2001.

However, it appears that may soon come to an end.

As falling oil prices, BHP’s South32 demerger and the tailings dam mishap at the company’s jointly owned Samarco operations in Brazil has led to Rio Tinto beginning to close the gap between the two. This is the closest the two have been to each other since 2003, as Rio has caught up significantly since the middle of 2014.

RELATED TOPIC: Rio Tinto launches Australia's first solar-power mine

Rio Tinto’s ability to slim down its debt under managing director Sam Walsh the past three years has helped the company outperform BHP despite sliding iron ore prices. Last week, Walsh stated Rio’s June-half underlying profit performance of US$9.2 billion made it the most profitable miner in the world — ahead of BHP’s US$1.8 billion during the six-month period — for the first time since the merger.

In addition, BHP’s shares closed at a new 10-year low of $17.93 last week, while Rio closed at a six-year low of $44.38 despite being down 24 per cent this year.

RELATED TOPIC: How autonomous vehicles are helping Rio Tinto and BHP Billiton get ahead

Meanwhile, JPMorgan and Commonwealth Bank each have target prices predicting Rio’s market value will surpass BHP. JPMorgan has a BHP target price of $18, representing a market value of $92 billion, while Rio shows a market value of $107 billion.

Although Rio Tinto may close the gap even further, most still believe BHP will remain the world’s biggest miner. However, Rio may be a better value according to financial analysts.

RELATED TOPIC: How Tempo's extended deals with Chevron and Rio Tinto helps their projects

“Rio remains our preferred diversified miner as the market capitalisation and enterprise value discount to BHP remains, despite Rio generating higher earnings before interest, tax, depreciation and amortization and net profit than BHP,” said Citi analyst Clarke Wilkins.

Source: The Australian

Let's connect!  

Check out the latest edition of Business Review Australia!


Featured Articles

Ex Infosys President Ravi Kumar is the CEO Cognizant needs

Plagued by underperformance and multiple executive exits, Cognizant has replaced its CEO – what will ex Infosys President Ravi Kumar bring to the table?

How India is bucking the global dealmaking downturn

M&A deal volume and value reach record highs in India in 2022, despite slower dealmaking globally – as scope activity and acquisitions in renewables surge

Create C-suite space for the Chief Transformation Officer

Responsible for driving growth and change, the Chief Transformation Officer is the latest addition to the C-suite as business undergoes major change

12 AI predictions for the enterprise in 2023 – Dataiku


Welcome to the new breed of private members' clubs

Leadership & Strategy

Welcome to the New Age of the CISO

Leadership & Strategy