Rio Tinto Ltd. (ASX: RIO) is the second-largest metals and mining company globally. The Anglo-Australian company was founded in 1873. Since then, the RIO has grown into a giant in the mining industry through infinite acquisitions that helped expand its market share. It is a dual-listed company listed on London Stock Exchange and the Australian Stock Exchange.
The company has recently been through a variety of acquisitions. The company yesterday announced an acquisition offer, and despite its stock declined in the market.
RIO currently trades at $106.75, losing more than 4% in a single day trading with a trading volume of approximately 1.87 million shares. . Its previous close was $111.12. The stock has lost around 6% in the previous 52 weeks.
RIO: Key Financials 2021
Rio shares are declining despite the acquisition offer announced by the company on Monday. The company’s financials indicate that Rio Tinto is steadily growing each year.
- RIO reported a massive gain in revenue for fiscal 2021. The company’s revenue saw a significant growth of 43% to reach $63.50 billion compared to fiscal 2020. Fiscal 2020 revenue was $44.61 billion.
- Its NPAT growth was incredible, with a 116% increase compared to the last year’s net income. Its net income in fiscal 2021 was $21.09 billion, while its net income was $9.77 billion in fiscal 2020.
- Diluted EPS growth was also impressive, seeing an increase of 116% at $12.95 in fiscal 2021. Last year’s EPS was $6.00.
- The company’s balance sheet was also more robust than last year. Its cash and cash equivalents increased by 23% totalling $12.81 billion as of 31 December 2021.
RIO offers to acquire Turquoise Hill
In a non-binding proposal, Rio Tinto Ltd. (ASX: RIO) wants to buy the 49% of Turquoise Hill issued and outstanding shares that Rio Tinto does not already own. The Turquoise Hill Board will decide whether or not to accept the offer. As part of the Proposed Transaction, Turquoise Hill minority shareholders would get C$34 in cash per Turquoise Hill share, which is 32% more than Turquoise Hill’s last closing share price on the Toronto Stock Exchange. If this plan goes through, the Turquoise Hill minority share capital would be worth about US$2.7 billion.
Assuming the Proposed Transaction is completed successfully, Rio Tinto will possess a 66% stake in Oyu Tolgoi, with Mongolia owning the remaining 34% stake. Based on a Canadian dollar exchange rate of US$0.7874 as of 11 March, the value of Turquoise Hill minority shareholdings is estimated to be US$2.7 billion.
RIO’s Rincon Acquisition
In order to further develop its battery material business, Rio Tinto will now devote more resources to this endeavour. Earlier in December, the company revealed that it had purchased the Rincon mining property in Argentina from its private equity investors for a stunning 825 million dollars. The international corporation has said that this purchase indicates its commitment to strengthening its portfolio for the global energy transition and expanding its battery materials business via acquisition. According to corporate officials, the corporation is particularly interested in the project’s ability to generate battery-grade lithium carbonate, which is still in the early stages of development. Various large mining firms, such as RIO, are increasingly attempting to diversify their operations into so-called future-facing commodities, such as lithium, copper, and even fertilisers.
RIO CEO’s Remarks
Jakob Stausholm, CEO of Rio Tinto, remarked that Rio Tinto has a great belief in Oyu Tolgoi and Mongolia’s long-term development and delivery for all stakeholders. Therefore, RIO wants to grow its involvement in Oyu Tolgoi, streamline the ownership system, and boost Rio Tinto’s copper holdings further. In our opinion, the plan’s parameters entice Turquoise Hill’s investors.
With its current ambitions to acquire companies to place them under its massive brand umbrella, RIO will eventually increase its market share and revenues in the future. The company’s revenues are consistently growing alongside its NPAT. RIO’s balance sheet is also becoming more robust than before. They are preparing to gradually grow in the EV industry and other industries that will have more relevance in the future.