JOHANNESBURG -

Rio Tinto's stock price has fallen by as much as 40% this week, as investors flee from the latest scare story in global resources. Increasing numbers of investment analysts are cutting recommendations on Rio Tinto's stock, and warning that the debt-ridden mining house could be forced into a capital raising.

The latest trigger for the sell off in Rio Tinto was the news out on 25 November that BHP Billiton, the world's biggest diversified resources stock, had abandoned its bid for Rio Tinto. Rio Tinto's stock price is now down by 85% from its record highs, seen in May this year, and on Thursday moved to levels not seen in six years.

According to a recent report from credit rating agency Standard & Poor's, Rio Tinto's adjusted net debt on 30 June 2008 was about USD 50bn, more than twice Rio Tinto's current market capitalisation, or value. BHP Billiton, by contrast, has net debt of less than USD 10bn, and a market value of USD 94bn. A good portion of Rio Tinto's debt woes can be traced to its all-cash acquisition last year of Canada's Alcan, substantially expanding Rio Tinto's aluminium interests. Dollar aluminium prices moved to four year lows on Thursday, as the general slide in commodity prices continued.

According to a market report summary published by Bloomberg, analysts at Credit Suisse said Rio Tinto could sell shares; Citigroup this week cut its Rio Tinto target price; JPMorgan Chase reduced its target price by more than half, and ABN Amro cut its earnings estimate by 36% and recommended investors switch to BHP Billiton.