Rio Signals Ready to Step Up on Dealmaking as Market Bottoms – by David Stringer (Bloomberg News – May 1, 2015)

With the mining sector seen nearing the bottom of the cycle, Rio Tinto Group signaled to analysts it’s ready to resume mergers and acquisitions.

The company is prepared to look for a deal if it can secure the right asset at the correct valuation and win investor backing, Morgan Stanley said after an analysts’ meeting this week with Chief Financial Officer Chris Lynch.

An acquisition would be Rio’s first since 2012, according to data compiled by Bloomberg. As asset valuations get pushed lower, larger producers may be changing their attitude toward deals, according to Argo Investments Ltd.

“If they can buy tier-one assets at valuations that are closer to the bottom of the cycle, then that’s not a stupid thing to do,” said Jason Beddow, chief executive officer of Argo Investments, which manages about A$5 billion ($4 billion) in Australia and holds Rio shares.

The value of completed mining deals fell in 2014 to $51.3 billion, the lowest annual total in 10 years, according to data compiled by Bloomberg.

As recently as February, Rio’s Chief Executive Officer Sam Walsh said the company had “no near-term plans” for major acquisitions. A deal for Freeport-McMoRan Inc. or Anglo American Plc is “not on our radar,” he told investors. Rio Tinto spokesman Ben Mitchell today declined to comment.

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