Financial Analysis of the Performance of Rio Tinto Plc., and RandGold Resources Plc., in the Mining Sector of the FTSE 100

(Financial Analysis for Managers and Professionals)By:Horace Enwelim NwabunweneJanuary, 2010

Table of Contents

Title Page

..

..

..

1Table of Contents

..

..

..

2List of Tables and Figures..

..

..

3Executive Summary

..

..

..

41. Introduction

..

..

..

52. Objectives of the Financial Analysis

..

..

63. Profile of the Investor (Treasure Investments Limited)

..

64. Profile of Rio Tinto Plc.

..

..

75. Profile of RandGold Resources Plc.

..

..

86. Chairmans Statement for Rio Tinto Plc...

..

87. Chairmans Statement for RandGold Resources Plc.

..

98. Financial Analysis of the Performance of Rio Tinto Plc

..

109.Financial Analysis of the Performance of RandGold Resources Plc..

1310. Conclusion and Recommendation

..

..

18

References

..

..

..

19

Note

..

..

..

21

Appendix

..

..

..

21List of Tables and Figures

Tables

1 - Four Years Schedule of Ratios for Rio Tinto Plc., as at 31 December, 2006, 2007, 2008 and 2009, Respectively.

2 - Four Years Schedule of Ratios for RandGold Resources Plc., as at 31 December, 2006, 2007, 2008 and 2009, Respectively. Figures

1 - Five-Year Comparative Performance of Rio Tinto in the FTSE 100 (2006-2010).

2 - Levels of Long Term Debt and Equity of Rio Tinto for the Last Four Years.

3 - Five-Year Comparative Performance of RandGold and FTSE 100 (2005 2010)

4 - Equity and Long-Term Debt Financing Options of RandGold for the Period, 2006 - 20105 - Levels of Current Asset and Current Liability of RandGold for the Last Four Years6 - Behaviour of Gross Profit Margin and Net Profit Margin in the Last Four Years7 - Comparison of the Performance of Rio Tinto, RandGold, and the FTSE 100 (2005-2010)8- Price Movement of Gold for Five YearsExecutive Summary

The decision of Treasure Investments Limited to invest in the equities of a mining sector company, necessitated this financial analysis. The company has identified two companies in the mining sector, that is, Rio Tinto Plc., and RandGold Resources Plc., as prospective companies for investment. However, there is the need to understand the more lucrative of both, before investments can be made.

This analysis, therefore focused on the analysis of the ratios of Rio Tinto and RandGold, to ascertain, amongst others, their earnings per share, dividends per share, price earnings ratio, as well as dividend yield. It showed that, while Rio Tinto paid dividends per share of 41.25, 60.27, 192.51 and 57.29 cents in 2006, 2007, 2008 and 2009, respectively, RandGold paid nothing in 2006, and then, 9.03, 11.97 and 11.06 cents in 2007, 2008 and 2009, respectively. This singular example paints a picture of several other factors, which were considered, in this financial analysis.

The findings of the analysis, show clearly that, with all options and factors in relation to the shares of the two companies, considered, Rio Tinto is ideally a more lucrative company for the investment of Treasure Investments Limited. 1. IntroductionThe changes, which have been, and are being experienced, globally, have been evident in all sectors educational, information management, social, political, institutional, communication and financial (Hoberg & Phillips, 2010; Peress, 2010). In the financial sector, the trend has changed, from analogue (Hameed et al, 2010), to digital (Comerton-Forde et al, 2010). As a matter of fact, the trend has meant that, in all fields of the practice of the financial profession, the application of more precise, as well as sophisticated means of achieving goals, is now in vogue (Malloy et al, 2009). One of such ways, is in the ability to analyse financial statements and results of companies, in a bid to ascertaining their viability for investment, by intending investors. In essence, the trend in investment in equities, has now evolved from the former rule-of-thumb of merely taking a look at the achievements of the company (Comerton-Forde et al, 2010), to assessing the firms performance, in relation to that of anothers, perhaps, in the same sector, overtime, before investing (Hameed et al, 2010).

In this light, it is asserted by Baker et al (2009), that, the need to assess the performance of companies, using more precise strategies of financial analysis, is because, it is possible for an individual to erroneously assume that a company may be doing well, as a result of its past trends, when, in essence, that may not be the case. The fact, according to them, and as supported by Fang & Peress (2009), is that, the mere physical view of a company, does not assure of its capability for investment. On this premise, also, Gil-Bazo & Ruiz-Verdu (2009), believe that there is the tendency for serious human errors to be committed, in the process of trying to assume the viability of a company for investment in equities, by virtue of, perhaps, past trends. Therefore, the analysis of the financial position of a company using a fact-based, scientific method, becomes the solution (Juergens & Lindsey, 2009).

We are Infinity Financial Analysts, and our client has approached us, and seeks to know exactly, which company, in the mining sector, they should channel their investment. In this financial analysis, therefore, the financial performance of Rio Tinto Plc., will be analysed, and compared with that of RandGold Resources Plc. The outcome will enable us recommend to our client, which one to invest in, and the reason for such recommendation.

In doing so, this financial analysis, summarises the content of this report, introduces this work, examines the objectives of the financial analysis, takes a look at the objectives of the financial analysis, and presents the profile of Rio Tinto Plc. It further presents the profile of RandGold Resources Plc., the statements of the chairmen of both Rio Tinto Plc., and Randgold Resources Plc., as well as their financial performances. The financial analysis ends with conclusion and recommendation, on the basis of the financial analysis, to our client, on the company, which should receive its investment, and the reason for such a recommendation.2. Objectives of the Financial Analysis

The objectives of this financial analysis are to: i. identify two available sector-based companies for investment, suitable to the needs of our client,

ii. analyse the performance of the companies in comparison with each other, based on the needs of our client,

iii. advise our client on the best sector-based company, for investment purposes. 3. Profile of the Investor (Treasure Investments Limited) The Investor, our client, is a major player in equities investment globally. Treasure Investments Limited, has its reach, not only in Europe, but also, in Africa, and the Middle-East. The company began operations in 1991, and has successfully invested in several companies, from pharmaceutical to oil and gas, food and beverages, as well as retail. The companys underlying rationale for investing in companies, is to reap immediate dividends, from companies that currently do very well, while attempting to spread its investment tentacles to other sectors. Indeed, according to Chapman & Polkovnichenko (2009), the reasons for investment in equities by companies, are varied. For some companies, it is for immediate gain (Babenko, 2009; Grinblatt & Keloharju, 2009; Savor & Lu, 2009), just like it applies to our client. It is, for the pleasure of being a co-owner of the company for some others (Hsu et al, 2010; Klarman & Zweig, 2010; Michel et al, 2010), while, for several others, it is for the benefit of owning the company in the long-term, irrespective of the fact of reaping the dividends of the investment, in the immediate term (Edelen et al, 2010; Knewtson et al, 2010; Ram, 2010).According to the companys chairman, the basis for its investment is in the short term and for immediate gains, because, the company cannot afford to tie its resources down for so long, when the investment environment may not be fertile for investment:

It is our basic principle to put our money in the right place, and at the right time, and not invest meaninglessly. We will invest, at all time, and in any lucrative environment, if we are sure that we shall be reaping immediate benefits and using them for further investments. It is unscientific to invest, where the future appears bleak. The underlying rationale for all our investments, is for immediate benefits (Dr. Peter F. Stakeman Chairman).4. Profile of Rio Tinto Plc.Rio Tinto Plc., is a leading name in the production of metal and mineral, in stages. The company produces aluminium, copper, diamonds, iron ore, uranium, coal, industrial minerals (borates, titanium dioxide, zircon, talc, salt) and gold (Rio Tinto Annual Reports, 2009). The operation of the company is mainly in Australia and North America, but it operates in over 50 other countries, and employs close to 102,000 people, with health and safety, and sustainable development, at the heart of their activities (Rio Tinto Annual Reports, 2009). The company operates globally, and has a set of standards, to guide its operations, bearing in mind that standards are energy providers for businesses (Attig et al, 2009; Jain & Arora, 2009; Mehta & Jain, 2009). It specifically has the strategy of investing in, and operating mines and businesses, which will stand the test of time, as well as having assets that provide options for growth, as it has to do with demand. Furthermore, the company believes in its recapitalisation and asset divestment programmes, which has strengthened its balance sheet and provided other options for growth and expansion (Rio Tinto Annual Reports, 2009).5. Profile of RandGold Resources Plc. The company is an African company that focuses on the mining and exploration of gold, and is listed on the London Stock Exchange, as well as NASDAQ (RandGold Annual Reports, 2009). As a result, the company is able to compete favourably on the global plain, by standing as a lucrative venture, on the basis of its shares (Baba & Goko, 2009; Bagchee, 2009; Chan et al, 2009; Shahrur & Venkateswaran, 2009). The company has, to date, discovered 7.5 million ounces of Morila deposit of gold in southern Mali, 7 million ounces of Yalea gold deposit, as well as 3 million ounces of Gounkoto deposit, both in western Mali (RandGold Annual Reports, 2009). Also, the company has discovered 4 million ounces of Tongon gold deposit in the Cote dIvoire, as well as 3 million ounces of Massawa gold deposit, in eastern Senegal (RandGold Annual Reports, 2009).The company financed and completed the building of the Morila Mine in October, 2000, and this has, since then, contributed more than 5.5 million ounces of gold, as well as distributed cash worth more than $US1.5 billion to stakeholders (RandGold Annual Reports, 2009). The companys major gold projects are Gounkoto on the Loulou permit in Mali, Kibali in the Democratic Republic of the Congo, as well as Massawa in Senegal. The company, in 2009, acquired a 45% interest in the Kibali project, which currently stands at 9.2 million ounces of reserves. It is equally one of the largest undeveloped gold deposits in Africa (RandGold Annual Reports, 2009).6. Chairmans Statement for Rio Tinto Plc.Rio Tinto Plc., began on a very difficult note in 2009, but, according to the Chairman, sailed through the difficult times, as the year progressed. In essence, the company was able to sail through, as a result of its ability to have shareholders support for its rights issue. Specifically, the Chairman maintains:After the particularly difficult first few months, characterised by our balance sheet challenges, very weak demand, low product pricing and the contentious Chinalco transaction, our fortunes improved considerably as the year progressed. As a result of shareholder support for our rights issues, together with the success of our disposal programme and improved operating conditions, we ended the year with a much stronger balance sheet (Jan du Plessis Chairman).It shows that, through tumultuous times, the company has come to wade through the storm, and to bounce back on track, basically, because, amongst others, it had shareholders support for its shares.7. Chairmans Statement for RandGold Resources Plc. RandGold Resources Plc., had a very challenging year in 2009, when it had to show clearly, the benefit of long-term investment, rather than short-term gains, as underlying its operations. The Chairman, states:

The record results achieved in 2009, the most challenging year in the companys history, have underlined RandGolds growing stature as a leader in the African gold mining industry. They have also demonstrated again, the crucial importance of a strategy focused on the long-term creation of value, rather than on seizing short-term gains (Philippe Lietard Chairman).In essence, therefore, the focus on the long-term value creation strategy of the company, indicates that, irrespective of its challenges at any particular point in time, it is specifically what happens eventually, that matters.8. Financial Analysis of the Performance of Rio Tinto Plc.The financial ratios of Rio Tinto Plc., for four years (2006-2009), are presented in table 1.

Table 1: FOUR YEARS SCHEDULE OF RATIOS FOR RIO TINTO PLC., AS AT 31 DECEMBER, 2006, 2007, 2008 AND 2009, RESPECTIVELY.

2006200720082009UNITS

INVESTORS RATIO

Earnings Per Share557.8568.7234.1276.2US Cents

Price-Earnings Ratio9.5418.669.2119.55Times

Long -Term Gearing10.35146.69132.3448.24%

Gearing plus Short term18.11177.89177.0150.09%

Equity Asset Ratio67.5132.2132.2552.36%

Dividend Per Share41.2560.27192.5157.29US Cents

Dividend Yield0.770.578.931.06%

Dividend Cover17.8011.992.386.09Times

Interest Cover92.4331.835.4719.19Times

LIQUIDITY RATIO

Current Ratio1.191.110.661.57:1

Quick Asset Ratio0.750.840.381.05:1

ACTIVITY RATIO

Stock holding Period56414349Days

Debtors Payment Period31542429Days

Creditors Collection Period29462220Days

Working Capital Cycle58494558Days

PROFITABILITY RATIO

Gross Margin23.5814.1811.0112.02%

Net Margin30.9223.119.3613.13%

Return on Capital Employed36.057.5316.649.60%

Return on Equity40.5829.4324.2012.59%

Asset Turnover1.311.272.590.96Times

PRICE PER SHARE

5324.410614.42156.435398.81US Cents

The provision of table 1, shows that, the companys share price increased with over 150% between 2008 and 2009 financial year. The company, in 2008, paid out 192.51 cents in dividends, per every of its shares. Similarly, its long-term gearing dropped from 132.34%, to 48.24%, indicating that it has succeeded in reducing, drastically, its debts, to make room for re-investment in production and assets. Thus, with its working capital cycle, increasing from 45 days in 2008, to 58 days in 2009, it is obvious that the company is geared towards having more working capital to last for more days, and allow for more provisions in its operations. The chairman, in his statement, states that the year had been one of two halves. Indeed, a look at the dividend yield of the company, shows that, in 2008, it stands at 8.93%, and1.06%, in 2009. Basically, the investment opportunities of this company, as an immediate source of profit for shares, in the short-term, indicate that it is worthwhile investing it its shares. Figure 1: Five-Year Comparative Performance of Rio Tinto in the FTSE 100 (2006-2010)

Source: http://markets.ft.com/tearsheets/performance.asp?s=RIO%3ALSE Although the computed financial ratios of Rio Tinto show a company that is highly geared, with close to 50% of its capital made up of long-term debt in 2009, the companys efforts at equity financing, according to the Chairman, paid-off, through rights issues. This is evident, also, with the price-earnings ratio increasing from 9.21 times in 2008, to 19.55 times, in 2009. This shows that, the company has embarked on a de-emphasis on debt financing as its source of external finance, to that of equity financing. It further shows the confidence, which shareholders have in the shares of the company, and in its ability to stand the test of time, especially in the short (immediate) term. In figure 2, there is a comparison of the levels of long term debt and equity of Rio Tinto, in the last four financial years.

Figure 2: Levels of Long Term Debt and Equity of Rio Tinto for the last four years

Source: AuthorThe relatively high volatility of the companys share price which, as at 23 July 2010, is 5,083.97 US cents (http://uk.finance.yahoo.com), shows a fall of about 6%, when compared to its December, 2009 figure of 5,398.81 US cents. Despite this, the company boasts of a price-earnings ratio, which is higher than that of the FTSE 100 and the mining industry, as at 23 July 2010, at 19.39, 13.56 and 12.8 respectively. The evidence presented by these ratios, shows that in terms of the activity ratios, the management achieved impressive results, holding stock for less number of days averaging 47 days, and an average working capital cycle of 53 days for the period under review. This suggests that the company has control over its stock control and management.9. Financial Analysis of the Performance of RandGold Resources Plc. The financial ratios of RandGold Resources Plc., for four years (2006-2009), are presented in table 2.

Table 2: FOUR YEARS SCHEDULE OF RATIOS OF RANDGOLD RESOURCES PLC., AS AT 31 DECEMBER, 2006, 2007, 2008 AND 2009 RESPECTIVELY.

2006200720082009UNITS

INVESTORS RATIO

Earnings Per Share70605486US Cents

Price Earnings Ratio32.8160.8278.5892.36Times

Long Term Gearing0.750.460.190.01%

Gearing (including short-term)151.10129.11129.06157.83%

Equity Asset Ratio72.0984.6394.8898.54%

Dividend Per ShareNil9.0311.9711.06US Cents

Dividend YieldNil0.250.280.14%

Dividend CoverNil6.645.148.45Times

Interest Cover30.3818.8917.4414.13Times

LIQUIDITY RATIO

Current Ratio5.396.994.027.48:1

Quick Asset Ratio4.526.083.176.51:1

ACTIVITY RATIO

Stock holding Period6184100110Days

Debtors Payment Period1730916Days

Creditors Collection Period17291616Days

Working Capital Cycle618593110Days

PROFITABILITY RATIO

Gross Margin20.0110.5010.8014.69%

Net Margin18.5114.5612.5717.68%

Return on Capital Employed19.5410.4211.016.67%

Return on Equity14.937.526.835.01%

Asset Turnover0.810.520.540.28Times

PRICE PER SHARE 2297.443649.234243.547942.92US Cents

The performance of RandGold, as indicated by the ratios above, shows that the company, in the long-term, has been able to reduce its long-term gearing from 0.75% in 2006, to 0.01% in 2009. However, in the short-term, its gearing increased from 129.11% in 2006, to 157.83% in 2009. This, obviously, is indicative of the companys unsuitability for investment, in the short-term. Also, the dividends per share, dropped from 11.97 cents in 2008, to 11.06 cents, in 2009. In just one year, shareholders lost approximately 0.91 cents of their valued shares. In addition, its debtor payment period increased from 9 days in 2008, to 16 days, in 2009, implying that if debtors will have such a long period of time to service their debts to the company, then, the company must source for funds to finance its operation, from elsewhere. This is indicated by the increase in its short-term gearing, from 129.06%, to 157.83%.Figure 3: Five-Year Comparative Performance of RandGold and FTSE 100 (2005 2010)

RandGold Resource Company

FTSE 100

Source: http://markets.ft.comThe Dividend yield has been on the decline year-on-year from dividend yield 0.25% in 2007 to 0.14% in 2009, except for a 12% increase from 0.25% to 0.28% in 2008. The falling dividend yield suggests the company is investing more of its profit after tax in new mines and other assets like the Tongon Mine development in Cte dIvoire and the acquisition of 45% interest in the Kibali project in the Democratic Republic of the Congo. A company that finds itself in this state, surely cannot guarantee that shareholders funds are safe.Figure 4: Equity and Long-Term Debt Financing Options of RandGold for the Period, 2006-2010.

Source: Author

The companys current and quick asset ratios, which averaged 5.97:1 and 5.07:1 respectively for the period, 2006 to 2009, indicate that the company has adequate short-term assets to meet its short-term liabilities as they fall due. This suggests that the company has more liquid current assets that are greater than its current liabilities. The strength of a thriving company, according to Peress (2010), is hinged on its ability to manage its resources, and avoid short-term borrowing, while settling its long-term debts. Also, he maintains that, fixed assets, not current assets, are the instruments for running a thriving and viable company. The fact, therefore, is that the company does not seem to fall into the category of a thriving company, on the basis of the statement.Figure 5: Levels of Current Asset and Current Liability of RandGold for the Last Four Years

Source: AuthorThe financial ratios with regards to profitability, shows that the gross profit margin and the net profit margin have a U shape for the period under review from 2006 to 2009 as shown in figure 6. The gross profit margin and the net profit margins, both fell in 2007 to 10.5% and 14.56% respectively, and further down in 2008 to 10.8% and 12.57%. Figure 6: Behaviour of Gross Profit Margin and Net Profit Margin in the Last Four Years

Source: Author

The return on capital employed (ROCE), and return on equity (ROE), have both fallen year-on-year by over 100% respectively since 2006. This is really worrisome in the short-term, bearing in mind, the need of Treasure Investments Limited.Figure 7: Comparison of the Performance of Rio Tinto, RandGold, and the FTSE 100 (2005-2010)

RandGold

Rio Tinto

FTSE 100Source: www.ft.com The chart above shows the performance of RandGold against Rio Tinto and the FTSE 100 Index for a period of five years. The movement of the share price shows that RandGold is relatively stable, compared with the FTSE 100 index, and Rio Tinto. However, it shows, also, that, the gains of RandGold were occasioned by the sharp increase in the demand for gold within the period, as opposed to other minerals. Despite this, gold will not always continue to appreciate, as other minerals, are, from time to time, dominating the markets. The strength of Rio Tinto, therefore, lies in its diversity of products, and this is not good enough for the company.Figure 8: Price Movement of Gold for Five Years

Source: www.ft.com10. Conclusion and RecommendationThis report benefits from an extensive analysis of the financial reports of Rio Tinto Plc., and RandGold Resources, Plc. The conclusion and recommendations, are presented in the following format.

From:

Infinity Financial AnalystsTo:

Treasure Investments Limited

Date:

1st April, 2011

Subject:Recommendation on Equities Investment Plan

The position of the Chairman of Rio Tinto Plc., indicates the companys recognition of the strength of its shareholders, and in their abilities to turn around, the fortunes of the company. In essence, the company knows that the shareholders are, by virtue of the fact that they hold shares in the company, in the short-term, able to ensure the future of the company. The position of the Chairman of RandGold Resources, Plc., is that, investment in its equities, are characterised by long-term gains. It is, therefore, highly recommended that Treasure Investment Limited, considers a look at investing in the shares of Rio Tinto Plc., in furtherance with its short-term investment plans.

Furthermore, Rio Tinto, specialises in mining varied minerals, such as aluminium, copper, diamond, iron-ore, uranium, coal, industrial minerals (borates, titanium dioxide, zircon, talc, salt), and gold. This is opposed to RandGold, which mines just gold. The essence of this, is that, Rio Tinto has the prospects of doing better from time to time, irrespective of whatever happens to gold, as a commodity. If, for example, gold suffers price fall in the commodities market, Rio Tinto will be sure to stay afloat, and not disappoint its shareholders, due to its investment in other commodities.

Finally, the ratios of the two companies, show, in relation to their share prices, that, while Rio Tintos earnings per share were 557.8, 568.7, 234.1 and 276.2 cents in 2006, 2007, 2008 and 2009, respectively, those of RandGold were 70, 60, 54 and 86 cents, in 2006, 2007, 2008 and 2009, respectively. It is clear, therefore, that there is no basis for comparison. Also, the price-earnings ratios of Rio Tinto were, 9.54, 18.66, 9.21 and 19.55 times in 2006, 2007, 2008 and 2009, respectively, while it stood at 32.8, 60.82, 78.58 and 92.36 times, in 2006, 2007, 2008 and 2009, respectively, for RandGold. In addition, the dividends-per-share of Rio Tinto, were, 41.25, 60.27, 192.51 and 57.29 cents, in 2006, 2007, 2008 and 2009, respectively, while, for RandGold, they were nil in 2006, and 9.03, 11.97 and 11.06 cents, for 2007, 2008 and 2009, respectively.

As a result of the findings of this financial analysis, and bearing in mind your focus of investing in the short-term, while reaping the benefits of your investments, it is the recommendation of Infinity Financial Analysts, that you invest in the shares of Rio Tinto Plc.

Sincerely,

Carol Tuckslim

Chief Investment Advisor

For: Infinity Financial AnalystsReferencesArora, R.K., & Jain, P.K., (2009), Behaviour of Stock Returns in Selected Emerging Markets. Journal of Financial Management and Analysis, vol. 22(2), pp. 13-25.

Attig, N., El Ghoul, S., & Guedhami, O., (2009), Do Multiple Large Shareholders Play a Corporate Governance Role? Evidence from East Asia. The Journal of Financial Research, vol. 32(4), pp. 395-422.

Baba, N., & Goko, H., (2009), Hedge Fund Survival: Non-Normal Returns, Capital Outflows, and Liquidity. The Journal of Financial Research, vol. 32(1), pp. 71-93.Babenko, I., (2009), Share Repurchases and Pay-Performance Sensitivity of Employee compensation Contracts. The Journal of Finance, vol. 64(1), pp. 117-150.

Bagchee, D., (2009), Investors Adjust Expectations Around Sell-Side Analyst Revisions in IPO Recommendations. The Journal of Financial Research, vol. 32(1), pp. 53-70.

Baker, M., Greenwood, R., & Wurgler, J., (2009), Catering through Nominal Share Prices. The Journal of Finance, vol. 64(6), pp. 2559-2590.

Chan, W.H., Jha, R., & Kalimipalli, M., (2009), The Economic Value of Using Realized Volatility in Forecasting Future Implied Volatility. The Journal of Financial Research, vol. 32(3), pp. 231-259.

Chapman, D.A., & Polkovnichenko, V., (2009), First-Order Risk Aversion, Heterogeneity, and Asset Market Outcomes. The Journal of Finance, vol. 64(4), pp. 1863-1887.

Comerton-Forde, C., Hendershott, T., Jones, C.M., Moulton, P.C., & Seasholes, M.S., (2010), Time Variation in Liquidity: The Role of Market-Maker Inventories and Revenues. The Journal of Finance, vol. 65(1), pp. 295-331.

Edelen, R.M., Marcus, A.J., & Tehranian, H., (2010), Relative Sentiment and Stock Returns. Financial Analysts Journal, vol. 66(4), pp. 1-13.

Fang, L., & Peress, J., (2009), Media Coverage and the Cross-Section of Stock Returns. The Journal of Finance, vol. 64(5), pp. 2023-2056.

Financial Performance of Sector Members in the FTSE. Accessible from: http://markets.ft.com/tearsheets/performance.asp?s=RIO%3ALSE Gil-Bazo, J., & Ruiz-Verdu, P., (2009), The Relation Between Price and Performance in the Mutual Fund Industry. The Journal of Finance, vol. 64(5), pp. 2153-2183.

Grinblatt, M., & Keloharju, M., (2009), Sensation Seeking, Overconfidence, and Trading Activity. The Journal of Finance, vol. 64(2), pp. 549-578.

Hameed, A., Kang, W., & Viswanathan, S., (2010), Stock Market Declines and Liquidity. The Journal of Finance, vol. 65(1), pp. 257-293.

Hoberg, G., & Phillips, G., (2010), Real and Financial Industry Booms and Busts. The Journal of Finance, vol. 65(1), pp. 45-86.

Hsu, J.C., Kalesnik, V., & Myers, B.W., (2010), Performance Attribution: Measuring Dynamic Allocation Skill. Financial Analysts Journal, vol. 66(6), pp. 1-10.

Juergens, J.L., & Lindsey, L., (2009), Getting Out Early: An Analysis of Market Making Activity at the Recommending Analysts Firm. The Journal of Finance, vol. 64(5), pp. 2327-2359.

Klarman, S.A., & Zweig, J., (2010), Opportunities for Patient Investors. Financial Analysts Journal, vol. 66(5), pp. 18-28.

Knewtson, H.S., Sias, R.W., & Whidbee, D.A., (2010), Style Timing with Insiders. Financial Analysts Journal, vol. 66(4), pp. 1-21.

Malloy, C.J., Moskowitz, T.J., & Vissing-Jorgensen, A., (2009), Long-Run Stockholder Consumption Risk and Asset Returns. The Journal of Finance, vol. 64(6), pp. 2427-2479.

Mehta, C.M., & Jain, P.K., & Yadav., S.S., (2009), Rationale of Stock Dividends/Bonus Shares: An Empirical Study of Private Sector Enterprises in India. Journal of Financial Management and Analysis, vol. 22(1), pp. 28-39.

Michel, A., Oded, J., & Shaked, I., (2010), Not All Buybacks are Created Equal: The Case of Accelerated Stock Repurchases. Financial Analysts Journal, vol. 66(6), pp. 1-18.

Peress, J., (2010), Product Market Competition, Insider Trading, and Stock Market Efficiency. The Journal of Finance, vol. 65(1), pp. 1-43.

Ram, O.S., (2010), Financial Management Indicators to Aid Decision (Statistics). Journal of Financial Management and Analysis, vol. 23(1), pp. 5-12.

RandGold Resources Plc. (2010), Annual Financial Report, 2009.Rio Tinto Plc. (2010), Annual Financial Report, 2009.Savor, P.G., & Lu, Q., (2009), Do Stock Mergers Create Value for Acquirers? The Journal of Finance, vol. 64(3), pp. 1061-1097.

Shahrur, H., & Venkateswaran, A., (2009), Industry Prospects and Acquirer Returns in Diversifying Takeovers. The Journal of Financial Research, vol. 32(1), pp. 23-51.

The Performance of the FTSE in Relation to its Members. Accessible from: http://uk.finance.yahoo.com/Note

a. The Annual Reports for 2009, are the most recent Annual Reports of the two companies, and as such, were used for the financial analysis.Appendix

Director Dealings

Trade Date

Insider

Transaction

Shares

Price

Amount

Holding

26 Feb 2009

Jon WaldenNon-Executive Director

TF

400

N/A

N/A

N/A

26 Feb 2009

Karl VoltaireNon-Executive Director

TF

400

N/A

N/A

N/A

26 Feb 2009

Karl VoltaireNon-Executive Director

TF

262

N/A

N/A

N/A

26 Feb 2009

Karl VoltaireNon-Executive Director

TF

447

N/A

N/A

N/A

26 Feb 2009

Aubrey PaverdNon-Executive Director

TF

400

N/A

N/A

1000 (0.06%)

26 Feb 2009

Aubrey PaverdNon-Executive Director

TF

262

N/A

N/A

1000 (0.06%)

26 Feb 2009

Aubrey PaverdNon-Executive Director

TF

447

N/A

N/A

1000 (0.06%)

26 Feb 2009

Philippe LietardChairman

TF

400

N/A

N/A

1000 (0.04%)

26 Feb 2009

Philippe LietardChairman

TF

262

N/A

N/A

1000 (0.04%)

26 Feb 2009

Philippe LietardChairman

TF

447

N/A

N/A

1000 (0.04%)

26 Feb 2009

R I IsraelNon-Executive Director

TF

400

N/A

N/A

1000 (0.06%)

26 Feb 2009

R I IsraelNon-Executive Director

TF

262

N/A

N/A

1000 (0.06%)

26 Feb 2009

R I IsraelNon-Executive Director

TF

447

N/A

N/A

1000 (0.06%)

26 Feb 2009

Christopher ColemanNon-Executive Director

TF

400

N/A

N/A

N/A

26 Feb 2009

Norborn P ColeNon-Executive Director

TF

400

N/A

N/A

N/A

26 Feb 2009

Norborn P ColeNon-Executive Director

TF

262

N/A

N/A

N/A

26 Feb 2009

Norborn P ColeNon-Executive Director

TF

447

N/A

N/A

N/A

26 Feb 2009

Bernard H AsherNon-Executive Director

TF

400

N/A

N/A

1000 (0.03%)

26 Feb 2009

Bernard H AsherNon-Executive Director

TF

262

N/A

N/A

1000 (0.03%)

26 Feb 2009

Bernard H AsherNon-Executive Director

TF

447

N/A

N/A

1000 (0.03%)

Recommendation Trends

Number of brokers recommending as

Current Month

1 Month Ago

2 Months Ago

3 Months Ago

Buy

4

1

3

3

Overweight

1

0

0

2

Neutral

10

4

5

3

Underweight

0

0

0

0

Negative

2

0

1

0

Mean Recommendation

1.9

1.8

1.8

1.5

1