Berenberg maintains ‘hold’ rating on Rio Tinto following ‘sensible’ Salar del Rincon acquisition

by | Dec 22, 2021

Analysts at Berenberg said in a flash note on Wednesday that Rio Tinto’s $825.0m acquisition of the Salar del Rincon lithium brine project in Argentina was an “interesting deal” for the firm.
Berenberg said the deal was a reflection of intent by Rio Tinto to gain more exposure to batter metals, and confirmation from management that it was looking to enter into higher-risk jurisdictions for the right project.

“Given a compelling initial NPV, this looks like a sensible deal, although ensuring that the process works on a commercial scale and that costs are accurate is a key risk,” said the analysts.

“However, even if we think there could be some capex creep and higher opex, this appears to still be a low-cost, scalable project in an attractive commodity. We view the deal as a small positive for Rio, with the stock trading up on the ADRs on the announcement.”

The German bank added that it values Rio Tinto on a blend of 1.0x net asset value and 5.0x enterprise value/earnings before interest, tax, deprecation and amortisation, with the EV/EBITDA multiple reflecting a through-the-cycle valuation and resulting in a price target of 5,000.0p per share.

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