Rio Tinto, which owns the New Zealand Aluminium Smelters, at Bluff, had a large portfolio of long-lived assets with low operating costs.
Operations included aluminium, coal, copper, diamonds, gold, iron ore, industrial minerals and uranium mining.
That base set Rio Tinto apart from most of its peers, he said.
However, the invested capital base was inflated by substantial procyclical investment during the height of the China boom, the rot setting in by overpaying for Alcan and subsequent excessive iron ore expansion.
Aluminium should constitute a substantially larger share, given the $US40billion ($NZ55.1billion) Rio Tinto controversially paid for Alcan in 2007. But much of that investment money had ''gone to heaven'', Mr Hodge said.
The combination of those factors meant returns were likely to remain below the cost of capital for the foreseeable future, he said.
A more recent focus on reduction of debt and costs meant new investment was curbed.
In 2016, the company had only three major expansion projects due to be finished during the next three years.
''Given our view of much weaker forecast commodity demand growth, we expect Rio Tinto's capital plans will remain relatively subdued.''
Morningstar's fair value estimated for Glencore and Rio Tinto were unchanged with Glencore's proposal to take on Rio Tinto's interest in Coal and Allied.
Glencore proposed to buy Rio Tinto's 67.6% interest in the Hunter Valley operations, 80% of Mount Thorley and 55.6% of Warkworth for $US2.55billion, $US100million more than Yancoal's existing proposal.
Glencore would also spend a further $US920million to acquire Mitsubishi's 32.4% share of the Hunter Valley operations and its 28.9% in Warkworth, Mr Hodge said.
The sale of coal assets was a mild positive for Rio Tinto and a mild negative for Glencore.
From a strategic point of view, Glencore, with adjacent operations, was a natural owner of Rio's Hunter Valley coal mines and was well placed to extract cost savings.
But Glencore was overpaying, given current elevated coal prices were unlikely to last, he said.
Morningstar had no-moat ratings for Rio Tinto and Glencore. Glencore's industrial assets, which accounted for about 75% of group operating profit, lacked cost advantage.
Rio Tinto's iron ore division had low operating costs but the significant investments made through the commodities boom meant the overall group was unlikely to earn its cost of capital in the longer-term.
Both Rio Tinto and Glencore were overvalued, he said.
Rio Tinto's strongest business was iron ore and, in terms of both forecast returns and operating costs, it was still exposed to a likely decline in fixed-asset investment in China.
''We don't think the market is pricing for likely structural demand weakness.''
Copper was similarly exposed to investment in China, as about half of the world's copper demand was from China and 80% of that from investment-driven end markets.
Aluminium was more favourably exposed to consumer demand but growth rates were still likely to slow considerably with a commensurate impact on prices.
Glencore was also exposed to China through its most important mined commodities of copper and coal.
''We are mildly encouraged by Rio Tinto's continued sale of non-core assets, particularly as they are within the company's lower-returning divisions. The improved capital discipline should continue for the next few years at least.
''We think Rio Tinto has sufficient scar tissue from its missteps for now but are loath to extrapolate such confidence far into the future.''
Capital allocation in the mining industry was difficult and had historically been notoriously procyclical, Mr Hodge said.
The lure for growth, either by acquisition or development, was often strongest when commodity and asset prices were high and the odds favoured value destruction.
