Friday, 18 May, 2007

by Barry Fitzgerald
The Age

TAKEOVER fearful Rio Tinto has set out to convince the market that its uranium assets could be worth as much as $US20 billion ($A24.1 billion) or four times the value ascribed to the portfolio by most company watchers.

Success in the campaign could force analysts to lift their valuations of the group's share price — the best defence the dual-listed Rio could ask for at a time when speculation on a $US110 billion takeover bid from BHP or a friendly merger with Brazil's CVRD continue to swirl.

Rio's nuclear campaign kicks off in London on Monday when its chief financial officer, Guy Elliott, and its chief energy officer, Preston Chiaro, will talk up the group's uranium interests in a presentation to analysts, webcast to Australian analysts at 5.30pm AEST.

The 90-minute presentation will seek to convince analysts that Rio is better placed than most companies to benefit from the surge in uranium prices from $US20 a pound a couple of years ago to the current $US120 a pound. That is due mainly to existing production interests at Ranger in the Northern Territory and Rossing in Namibia.

Both operations have low-cost "brownfield" expansion opportunities, allowing Rio to argue that it will be able to seize the full benefit of the uranium price surge well ahead of BHP, which will have to wait until 2013 to get a uranium lift from the $A10 billion expansion of the Olympic Dam operation in South Australia.

Rio also owns the undeveloped Kintyre deposit in Western Australia, which cannot be developed under current state Labor Party policy. It has also removed from sale the fully permitted Sweetwater uranium mill and adjacent mine it has in the United States.

Rio's promotion of its uranium assets has similarities to a campaign by WMC managing director Andrew Michelmore during the shoot-out between Xstrata and BHP for control of the group in 2004-05. Mr Michelmore argued that the market was substantially undervaluing the uranium component of WMC's Olympic Dam copper/uranium operation, home to 40 per cent of the world's uranium reserves.