Rio up 3.5% early

Sam Walsh, Rio Tinto’s (ASX: RIO) new CEO is determined to remove projects that are a drag on the core business model of the mining giant.

Yesterday, the company announced that it will be selling off its Eagle project to Lundin (TSX: LUN) for US$ 235 million in cash. This morning, investors took to the market showing their approval of the decision, pushing the stock price up 3.5% to $53.39 in early trading.

The move comes as Rio aims to pay down debt and improve cash flow in the short to medium term. It may prove to be particularly vital for the company because it’s most recent report highlighted a significant decline in profit, which resulted in a $3.0 billion loss.

Investors shouldn’t get excited by the short term volatility as there are still many factors which will affect the companies underlying margins that have not yet been fully realised. BHP (ASX: BHP) and Rio are both worthy of a spot on your watchlist but if you’re after growth and income there are other stocks now available at a heavily discounted price.

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Motley Fool contributor Owen Raszkiewicz owns shares in BHP.

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