Rio Tinto plc (RIO) Ordinary 10p

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Rio Tinto’s Capital Markets Day included a range of tangible objectives. On production, it expects to grow annual production by an average of 3% out to 2030.

On costs it’s looking to lower unit costs by 4% over the same period. Rio’s also looking to deliver $650mn of efficiencies over the next three months, mainly by cutting corporate costs.

There was no specific net debt target, but the focus is on retaining an A grade credit rating, helped by the planned generation of $5-10bn from project partnerships.

For 2025, production guidance has been increased for copper but lowered for iron ore. In 2026, production is expected to stay broadly flat.

The shares were up 3.9% in early trading.

Our view

Rio Tinto’s strategic framework till the end of the decade received an enthusiastic response from the market. Despite a mixed outlook on near-term production, $650mn of soon-to-be-implemented cost savings should allow for modest upgrades to profit forecasts for 2026 and 2027.

The longer-term goals are more ambitious, but the focus on financial returns is an approach that we support, with potential growth in cash profit (EBITDA) of 40-50% by 2030 if all goes to plan. Increased production is only one part of that equation, underpinned by three major growth projects in iron ore, copper and lithium.

Rio has an established reputation for delivering world-class mines and infrastructure, but the nature of mineral extraction means there’s always execution risk as well as economic and political factors to be mindful of.

Iron ore is set to remain the largest contributor to the bottom line, but that reliance is expected to reduce as efforts to diversify the asset base accelerate. Iron ore prices have rebounded after tariff fears drove declines in the first half of 2025.

There’s scope for more volatility next year, but with many major mines reaching maturity, a supply gap is emerging. Rio’s Simandou mine in West Africa, which has recently started production, is one of the world’s largest untapped reserves of high-grade iron ore. It’s also the only real large-scale driver of new global supply in the foreseeable future.

Broadly speaking, the outlook for Rio’s other key focus metals, lithium, aluminium and copper looks positive. They all benefit from improving fundamentals and are key components in the energy transition. However, the speed of the shift to clean energy is hard to predict. With global growth expected to slow in 2026, some ups and downs are to be expected.

Rio’s expansion plans are backed up by a strong balance sheet. There have been no changes to the dividend policy of a 40-60% payout, but Rio tends to deliver at the top of this range. Plans to release cash from non-core assets, improve profitability and rein in investment spend could lay a foundation for more generous distributions yet, but no shareholder returns are guaranteed.

All in, Rio looks relatively attractive, with a robust project pipeline and growing exposure to decarbonising metals. The valuation has strengthened in recent months alongside the rally in iron ore prices. While we’re encouraged by the direction of travel, we think further evidence of strategic delivery or sustained commodity prices will be required to deliver meaningful upside, with the latter being outside of management’s hands.

Environmental, social and governance (ESG) risk

Mining companies tend to come with relatively high ESG risk. Emissions, effluences and waste, and community relations are key risk drivers in this sector. Carbon emissions, resource use, health and safety and bribery, and corruption are also contributors to ESG risk.

According to Sustainalytics, Rio Tinto's management of material ESG issues is strong.

There are comprehensive policies and strong management programmes that address material ESG issues, including a target to reduce emissions across operations (Scope 1 & 2) by 50% by 2030, as well as a 2050 net zero ambition. The new CEO has promised a sharp focus on safety and community engagement. But the accidental death of a contractor in 2025 and the destruction of an important Aboriginal heritage site in Australia serve as reminders of the risks that need to be addressed.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.

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