The Rio Tinto Limited (ASX: RIO) share price closed up 0.2% to $118.98 on Friday, though it reached a peak of $120.18 earlier in the day amid news relating to its alumina refinery.
But it also has other operations. The company has exposure to aluminium, copper, borates, lithium, diamonds, salt and titanium dioxide.
Rio Tinto has an 80% stake in an alumina refinery called Queensland Alumina. Rusal, a Russian aluminium company, owns the other 20%.
Action on Russian business
According to reporting by the Australian Financial Review, Rio Tinto will not need to consult its Russian partner when making operational decisions at the Queensland alumina refinery. Rusal will now be a ‘silent party’ with no power.
Rio Tinto could also enjoy an “economic windfall” after executing step-in rights because of sanctions on Russian businesses and billionaires, according to the newspaper.
It was reported that Rusal won’t get access to its volumetric share of alumina produced at the refinery during the period to which the step-in rights are related. Rusal’s share won’t accrue during this period, so it will “suffer a permanent economic loss”.
Therefore, Rio Tinto is in line to receive the economic value of the alumina volumes that would normally go to Rusal.
However, Queensland Alumina has reportedly not been paying cash dividends to its owners. Instead, Rio Tinto and Rusal receive physical volumes of alumina which is converted into aluminium at their smelters.
The AFR reported that the step-in rights have been under negotiation since the Russian invasion of Ukraine.
Rio Tinto comments
A Rio Tinto spokesman (quoted by the AFR) said:
As a result of the Australian government’s sanction measures, Rio Tinto has taken on 100% of the capacity and governance of Queensland Alumina Limited (QAL) until further notice.
Our focus remains on ensuring the continued safe operation of QAL, as a significant employer and contributor to the local Gladstone and Queensland economies.
Is the Rio Tinto share price an opportunity?
The broker Ord Minnett thinks the Rio Tinto share price is a ‘hold’ with a price target of $118 after increasing its expectations for the iron ore price in 2022 and 2023 thanks to the strength of the commodity.
Ord Minnett is expecting a grossed-up dividend yield of 15% from Rio Tinto in FY22.