Directors’ Deals: Rio Tinto insiders cash in

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Early in December, several Rio Tinto insiders actioned trades in relation to the mining group’s bonus deferral awards. Then, in the run-up to Christmas, two senior figures — Bold Baatar (chief executive, copper) and Alfredo Barrios (chief commercial officer) — offloaded shares worth around £7.8mn in aggregate. 

The trades were completed in the wake of a positive technical signal in the third week of November. Indeed, the group’s share price has risen by 30 per cent since the 12-month low point in mid-August, which is perhaps surprising given the outlook for industrial metals. The consensus seems to be that prices will be constrained through 2024 due to softening global demand, along with weakening capital investment, and adequate supply levels. However, the febrile geopolitical environment and prospects for the US dollar will doubtless feed into the mix through 2024.

Baatar and Barrios may have benefited from news that the Anglo Australian miner now expects to commence production at the Simandou iron ore joint venture in Guinea during 2025. The group views Simandou as “the world’s largest untapped high-grade iron ore deposit”, supporting an estimated mine life of 26 years. The promising ore grades and low impurities place Rio Tinto in an advantageous position given the steel industry’s push for decarbonisation; higher grades translate into higher premiums on the pricing front.

None of this will come cheap. Rio’s capital funding requirement for Simandou is estimated at $6.2bn (£4.86bn), equivalent to 62 per cent of the group’s cash profits from iron ore production at the June half-year. It’s a sizeable commitment and one which could hinder the group’s ability to maintain its existing levels of capital returns to shareholders. But an intensifying focus on higher-grade iron ore makes sense given the evolution of smelting technologies and industry carbon commitments.

Pearson exec sells ahead of Bird’s departure

Christmas came early for Giovanni Giovannelli, president of Pearson’s English language learning division, who pocketed £2.76mn through the sale of 295,000 shares at 934p apiece.

It’s unlikely that shareholders would grumble about Giovannelli’s windfall given the division increased revenue by a third over the first three quarters of the year. Volume growth has been primarily driven by the Australian and Indian markets, and the Pearson Test of English is now being accepted for Canadian student visa applications — a potential boon for the group given demographic trends and the growing scale of immigration globally.  

Some other sections of the business haven’t fared quite so well. The higher education division — which still accounts for almost a quarter of sales — registered a 5 per cent decline in revenues, though profitability has been supported by cost efficiencies. Admittedly, management has indicated that in some cases revenue recognition had been deferred until the final quarter of 2023, but the strain on the higher education top-line reflects an increasingly competitive marketplace. The strategic switch away from print products to digital channels has played well with industry analysts and shareholders alike, but the flip side of the equation is that digitalisation is synonymous with market disruption.  

Nonetheless, Pearson’s fortunes have certainly improved since Andy Bird replaced John Fallon as chief executive in 2020, as evidenced by an 80 per cent increase in the share price. Unfortunately, Bird is stepping down from the top job after three years at the helm. His successor Omar Abbosh, current president of Microsoft’s Industry Solutions arm, will be heading an operation still in transition, so the investment case remains far from clear cut.