Rio Tinto PLC
Materials
North America
Investment summary

Rio Tinto is one of the largest iron ore producers globally. The production of iron ore reached 324.1mt in 2022 (vs 319.7mt in 2021 100% basis) with most of it in Australia's Pilbara region. The company operates a large capacity of 3.0mt of aluminum output in 2022. Bauxite output reached 54.6mt in 2022, while mined copper was 521kt and iron ore pellets and concentrate output reached 10.3mt. Rio Tinto is a diamond producer in Canada with 3.8mn carats output in 2021. Refined gold (176k oz) and silver (2.6mn oz) are the company's by-products. Rio Tinto products include titanium dioxide slag (1.0mt in 2021), molybdenum (7.6kt), salt (5.8mt), and uranium (65k lbs U3O8). Diversified commodities output with a strong market position in iron ore for the steelmaking industry makes Rio Tinto one of the most influential players in the global metals market. The company benefits from vertical integrat... Rio Tinto is one of the largest iron ore producers globally. The production of iron ore reached 324.1mt in 2022 (vs 319.7mt in 2021 100% basis) with most of it in Australia's Pilbara region. The company operates a large capacity of 3.0mt of aluminum output in 2022. Bauxite output reached 54.6mt in 2022, while mined copper was 521kt and iron ore pellets and concentrate output reached 10.3mt. Rio Tinto is a diamond producer in Canada with 3.8mn carats output in 2021. Refined gold (176k oz) and silver (2.6mn oz) are the company's by-products. Rio Tinto products include titanium dioxide slag (1.0mt in 2021), molybdenum (7.6kt), salt (5.8mt), and uranium (65k lbs U3O8). Diversified commodities output with a strong market position in iron ore for the steelmaking industry makes Rio Tinto one of the most influential players in the global metals market. The company benefits from vertical integration controlling mining and refining operations, as well as from a large scale of operations that help to keep the operating costs under control. Rio Tinto benefits from commodity price growth in the post-COVID environment. However, lockdowns in China resulted in relatively weak steelmaking performance through 2022, pushing down iron ore and steel prices and valuations of iron ore producers.

Details
Ticker
RIO.L
Trading currency
GBp
Last close price, (currency)
4,600.5
Common shares outstanding
1,620,865,000
Preferred shares
0
MktCap, (currency) mn
98,386
Target price
Current opinion
Description

Rio Tinto plc is a UK-based metals and mining company operating in several segments: Iron Ore, Aluminium, Copper, Corporate, and Minerals. The Company has an integrated portfolio of iron ore assets, which includes a network of 17 mines, four independent port terminals, and a rail network spanning approximately 2,000 km. The Aluminium business includes 4 bauxite mines in Australia, Brazil, and Guinea; 4 alumina refineries in Australia, Brazil, and Canada; 14 aluminum smelters in Canada, Australia, New Zealand, and Oman; 7 hydropower plants in Canada. The Copper segment includes 3 copper operations in the US, Mongolia, and Chile; 3 copper projects in the US, Mongolia, and Australia. The compan... Rio Tinto plc is a UK-based metals and mining company operating in several segments: Iron Ore, Aluminium, Copper, Corporate, and Minerals. The Company has an integrated portfolio of iron ore assets, which includes a network of 17 mines, four independent port terminals, and a rail network spanning approximately 2,000 km. The Aluminium business includes 4 bauxite mines in Australia, Brazil, and Guinea; 4 alumina refineries in Australia, Brazil, and Canada; 14 aluminum smelters in Canada, Australia, New Zealand, and Oman; 7 hydropower plants in Canada. The Copper segment includes 3 copper operations in the US, Mongolia, and Chile; 3 copper projects in the US, Mongolia, and Australia. The company produces gold, silver, molybdenum, and other as by-products. The Minerals segment includes 4 sectors: borates, titanium dioxide, iron ore, and diamonds. The commercial segment encompasses global sales and marketing, procurement, and marine and logistics operations. Rio Tinto is present in 35 countries.

Industry view (TAM)

In 2021, the global production of usable iron ore was estimated at 2.6bt compared to 2.47bt in 2020. The largest iron ore-producing countries are Australia (c 900mt pa), Brazil (380mt), China (360mt), India (240mt), and Russia (100mt). Crude steel production fell by 4.2% YoY to 1,878.5mt in 2022, including a 2.1% decrease in crude steel output in China to 1013mt. Lockdown in China and weak performance of the real estate sector were among the factors affecting the steelmakers and iron ore demand. In 1H23, the iron ore price was slightly down. The weak macro and real estate performance negatively affect the iron ore and steel markets.

Pros
  1. Large resource base, including the presence in Australia's largest iron ore region  
  2. The large scale of operations provides some flexibility of control the cash cost  
  3. A diversified product range with a large by-product portfolio contributes to both revenue and margin  
  4. Own delivery capabilities and marketing help to get the market price and maintain strong customer relations
  5. The demand recovery in the post-COVID environment in China will likely drive the price and volumes higher in 2023-24
Cons
  1. Exposure to volatile commodity markets with some price downside on the back of weak macro
  2. Growing cash costs due to inflation background driven by energy prices
  3. Exposure to geopolitical risks, including relations between China and the Western world
  4. Exposure to local currencies in producing countries, as well as local macro trends and inflation
Risks
  1. Geopolitical risks
  2. Macroeconomic risks
  3. FX risks vs US dollar in producing countries
  4. Failure to execute mining projects
  5. ESG risks in producing countries
Historical price chart
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Peer Group (top 5)

Company RIC Market Capitalization, $mn Last reporting year P/E Fwd 1Y P/E Fwd 2Y EV/EBITDA 1Y fwd EV/EBITDA 2Y fwd EV/Revenues 1y fwd EV/Revenues 2y fwd
Rio Tinto PLC RIO.L 109,089 2022-12-31 8.6 9.2 4.9 5.0 2.2 2.2
Anglo American PLC AAL.L 39,544 2022-12-31 9.0 8.9 4.3 4.2 1.6 1.5
BHP Group Ltd BHP.AX 152,726 2022-06-30 11.0 12.1 5.7 5.8 2.9 3.0
Glencore PLC GLEN.L 72,296 2022-12-31 8.9 9.7 4.7 5.0 0.4 0.4
Antofagasta PLC ANTO.L 18,730 2022-12-31 23.4 23.7 6.8 6.2 3.5 3.3
Vale SA VALE3.SA 62,529 2022-12-31 6.1 6.4 4.1 4.2 1.8 1.8
Financials
2017 2018 2019 2020 2021 2022 2023 2024 2025
Revenue 40,030 40,522 43,165 44,611 63,495 56,059 51,818 50,443 50,138
Growth 1% 7% 3% 42% -12% -8% -3% -1%
EBITDA 17,945 17,618 21,087 23,868 36,850 27,923 23,862 22,954 23,124
EBITDA margin 44.8% 43.5% 48.9% 53.5% 58.0% 49.8% 46.0% 45.5% 46.1%
Net income 8,762 13,638 8,010 9,769 21,094 15,346 12,005 11,181 10,964
Net margin 21.9% 33.7% 18.6% 21.9% 33.2% 27.4% 23.2% 22.2% 21.9%
Net debt 3,571 -625 3,476 773 -1,757 -1,757 -1,757 -1,757 -1,757
MktCap 94,582 116,448 106,254 8,237,818 8,237,818 8,237,818 8,237,818

Historical Multiples

2019 2020 2021 2022 2023 2024 2025
EV/Revenue 2.3 2.6 1.6 146.9 158.9 163.3 164.3
EV/EBITDA 4.7 4.9 2.8 295.0 345.2 358.8 356.2
P/E 11.8 11.9 5.0 536.8 686.2 736.8 751.4
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