The good news continues for Rio Tinto.
Yesterday it regained its A-grade credit rating for the first time in several years.
Last week it ended the proposed iron ore joint venture with rival local producer BHP Billiton and confirmed plans to spend $US2.1 billion of its own money on a $US3.1 billion expansion of its WA operations in the Pilbara.
That was after extra spending had been announced earlier on copper, iron ore, coal and diamonds.
Yesterday ratings agency Moody’s said it had upgraded the debt rating of Rio Tinto Ltd, recognising the miner has significantly improved its balance sheet.
The extra spending on iron ore (and another $US3 billion in new spending on iron ore and other areas of the business here and offshore in the past couple of months) hasn’t worried Moody’s
Moody’s said the senior unsecured rating for Rio had risen from Baa1 to A3.
As of June 30 this year, Rio Tinto had gross debt of $US15.5 billion, down from $US49.7 billion at the end of 2007.
That debt jumped to pay for the poorly-timed Alcan takeover (for around $A44 billion) at the top of the commodity boom in 2007.
In an effort to improve its balance sheet, Rio sold off many of its non-core assets, especially in Alcan and in coal mining in the US and last year raised $US15 billion in a huge rights issue that was well supported by shareholders and other investors.
"The stable outlook reflects our expectations that prices for Rio’s products, particularly iron ore, coking coal and copper, will remain at levels sufficient to generate strong cash flows," Moody’s said.
"This more than compensates for volume variations due to normal mining sequencing," it said.
It said downward pressure on the rating was unlikely, given Rio’s improved capital structure and cash flow generation levels.
"The upgrade also acknowledges that, in conjunction with the overall debt reduction, Rio was able to eliminate its roughly $9 billion of debt maturities in each of October 2009 and 2010, as well as the $10 billion in 2012, thereby removing the potential liquidity challenges it faced and significantly improving its debt maturity profile," Moody’s said.
Rio’s Prime-2 short term rating was affirmed by Moody’s with a stable outlook.
Rio shares rose $2.05, or 2.5%, to $84.10.
That’s the highest close since September, 2008.
And Adelaide-based investment company, Argo Investments had good news for its shareholders at yesterday’s AGM in Adelaide.
The investor said, ahead of the meeting starting, that operating profit for the December half year will be about 15%, and possibly 20%, higher than thought.
The investment company said dividends after DuluxGroup demerged from Orica and from the recent Woolworths Ltd share buy-back had contributed to the rise in profit above previous expectations.
It said by itself those factors had led to a forecast result for its operating profit excluding realised gains or losses on long-term investments to be 15% above the previous corresponding period.
In its first half of fiscal 2009, the company made a net operating profit before of $71.64 million. An increase of 20% would see earnings jump to more than $91 million for the six months to December.
Argo is also a shareholder in Sydney-based listed investment companies Milton Corp and Choiseul, which have proposed a merger.
If approved, interim dividends from Milton and Choiseul will be accounted for in the half year ending December 31, instead of the second half of the financial year.
"In addition, if the transaction is approved, a special dividend from Choiseul will be accounted for in the half-year ending 31 December, 2010," Argo said in the update.
Argo said if that merger proceeded, its operating profit would be about 20% higher than expected.
Argo shares rose 9c to $5.97.
