Metals and mining major Rio Tinto Group (RIO) announced that it has made an investment in the European-based battery technology and manufacturing company, Inobat Auto. The quantum of the investment and the terms of the deal have not been disclosed so far.
Following the news, shares of the company declined 1.7% on Tuesday. The stock, however, pared its losses slightly to close at $60.69 in the extended trade.
Implications of the Deal
The investment follows a Memorandum of Understanding signed in May to establish a robust electric vehicle battery value chain in Serbia.
With this investment, Rio Tinto will gain access to InoBat’s expertise in the pioneering research, development, manufacture, and provision of premium innovative electric batteries custom-designed to meet specific requirements of customers within the automotive, commercial vehicle, motorsport, and aerospace sectors.
Notably, the company’s $2.4 billion Jadar lithium-borates project in Serbia will receive a shot in the arm with this investment.
Management Commentary
The Managing Director of Rio Tinto’s battery materials business, Marnie Finlayson, said, “We are delighted to be able to deepen our partnership with InoBat through our investment and look forward to benefitting from a broader perspective of the battery materials sector, as well as insights into future battery chemistries and technologies.”
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Price Target
On October 20, Jefferies analyst Chris LaFemina downgraded the stock from Buy to Hold. The analyst’s price target of $71 implies upside potential of 17.3% from current levels.
The analyst downgraded the stock on a sombre outlook for the iron ore sector in the future.
Overall, the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 3 Buys and 2 Holds. The average Rio Tinto price target of $77.38 implies that the stock has upside potential of 27.8% from current levels.
Smart Score
Rio Tinto scores a 7 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock is likely to perform in line with market expectations. Shares have declined 4.3% over the past year.
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