Rio Tinto (RIO) – Lithium Lover

Rio Tinto engages in exploring, mining, and processing mineral resources worldwide. The company operates through iron ore, aluminium, copper, and other mineral segments, including lithium, an area in which the Anglo-Australian miner is rapidly expanding. Rio Tinto was founded in 1873 and is head quartered in London.

‍

Rio Tinto (RIO) recently hosted an investor day where the company provided some mixed guidance on CY25 production volumes, with its copper target – around 10% below market expectations – proving the key talking point. The diversified miner also laid out its growth options into the early2030s and highlighted its commitment to expanding its lithium exposure.

‍

The company, which agreed in October to take over lithium miner Arcadium Lithium for $US7 billion ($10 billion), reaffirmed its faith in the long-term outlook for the battery metal, arguing the market would quintuple in size by the mid-2030s. Combined with its own developments – Jadar in Serbia and Rincon in Argentina (which has just received final investment approval) – the Arcadium acquisition would position Rio Tinto as the world’s No.3 lithium miner, behind only US-based Abermarle and Chile’s SQM, and lift its annual total production of lithium carbonate equivalent (LCE) to more than 450,000tonnes from circa 75,000 tonnes currently.

‍

Post the investor day, we made no changes to our CY24 EPS forecast, while the company’s guidance on copper and iron ore output means we cut our EPS estimates in CY25 and CY26 by 3% and 4%, respectively. This leadsus to cut our target price on Rio Tinto to $131.00 from $133.00, although we maintain our Buy recommendation.