Deutsche Bank analysts are urging Rio Tinto to enter the gold business and take advantage of its recent market run to target ASX-listed Newcrest Mining Ltd. in an all-share play, The Australian reported April 23.
A note by Deutsche Bank analyst James Gurry, which was cited in the news outlet's report, said Newcrest has "features complementary to Rio Tinto's business model, structure and strategy."
Both miners are among those with expertise in block-cave underground developments, with Newcrest managing director and CEO Sandeep Biswas being a former Rio Tinto executive and instilling the culture modeled after the mining major.
Further, the report noted that despite gold not being on the list of Rio Tinto's list of desired commodities, CEO Jean-Sébastien Jacques made it known that it intends to extend its exposure to copper.
Earlier this month, Rio Tinto agreed to invest an additional US$302 million to bring its Resolution copper joint venture with BHP Group in Arizona to the final stage of the permitting phase.
The move to acquire Newcrest would also increase Rio Tinto's listing and overall portion of Australian ownership to 35% from 23%, the analyst added, noting that it would pay out a greater portion of franked dividends in Australia and increase the usefulness of its franking credits.
Meanwhile, Rio Tinto's new Winu copper discovery in Western Australia is within proximity of Newcrest's Telfer operations, with Biswas noting that the size of the operation's mill and facilities made it a strategically important asset.
Gurry also calculated potential transactions involving Rio Tinto and either Anglo American PLC and Freeport-McMoRan Inc., but resulted in neither miner offering opportunities present with Newcrest.