Rio should go for a minority stake in MCP. Here's why:
1) Allows them to buy part of the company without fully committing 2) Allows them to have the "wait and see" approach on execution of the Phoenix project, and if it doesnt go well, they can pull out 3) Allows them to not take the full risk on REE prices. They can wait a year to see if REE prices recover and if so, then buy the remaining part of the company. If not, they unwind (or at worst lose their 20% stake) 4) Would likely allow them a seat or two on the MCP Board of Directors to gain access to all information about the company, helping them determine whether to purchase the remaining stake 5) The 19.9% would not require purchase accounting to come into play 6) The downside here is that a minority stake now with full purchase later will likely mean a larger price overall to pay for MCP assuming REE prices recover and Phoenix does well, however the larger price will go along with proven earnings.
Minority stake portion would likely be at $1B+, valuing the company at roughly $5-5.5B. This would take MCP's stock up to the high 40's, low 50's overnight. Rio, if youre listening, this is your best option.
*Moly has huge cash flow and there's no way of telling when the Chinese will restrict exports again. The recent purchse of the magnetic co in Canada creates a whole new end use technology that no one else has. Rio would be buying a $96 stock for $60. Great deal!!!!!!!!!!
How is it that you're not one of the king rainmaking investment bankers on Wall Street? And to think, rather than hiring Goldman Sachs or Greenhill for a princely sum, Rio Tinto could get the benefit of your investment banking counsel for free just by reading this board.