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Rio top pick at Liberum; stress tests for major miners
April 29, 2013 - 13:25 GMT
Analysts at Liberum Capital have upgraded Rio Tinto to their top pick among the major mining companies, they said in a note on Monday April 29.
Their order of preference among the majors is now led by
Rio, with a buy recommendation, followed by the merged
Glencore-Xstrata and BHP Billiton, both also buys, and
finally Anglo American, with a hold recommendation. "Dividend
coverage looks extremely robust [at Rio Tinto] under stressed
commodity prices," the analysts said. They have also tested the
strength of dividends at the majors under a stressed commodity
environment, and have found that they all continue to cover
dividends through free cash generation. Glencore-Xstrata
and Rio have the strongest coverage for their dividends,
although BHP still holds major flexibility in its capital
expenditure programme in onshore oil and gas, the analysts
said. Only Anglo fails to cover a BHP equivalent yield of 4.1%
with free cash under their bear-case commodity scenario,
according to the analysts. Glencore-Xstrata’s free
cash generation could easily support a BHP yield, they said,
and it is the best capital and operating...
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