ii view: Rio Tinto has mixed Q1 amid Middle East caution

First-quarter production update to 31 March

• Australian Pilbara iron ore production up 13% from a year ago to 78.8 million tonnes (mt)
• Copper production up 9% to 229 kilo tonnes (kt)

Guidance:

• Continues to expect Australian Pilbara iron ore shipments of between 323 mt and 338 mt in 2026 versus 326.2 mt in 2025

Chief Executive Simon Trott said:

"Safety is the foundation of our business. The tragic loss of two colleagues this year, at Simandou and Kennecott, is a stark reminder that we must ensure everyone goes home safely at the end of every shift.

"The unmatchable mix and scale of our portfolio has ensured growth and supply chain resilience against changing operating conditions as we continue to closely monitor the evolving situation in the Middle East. 

“Our stronger, sharper, simpler way of working is enabling us to move at pace to achieve productivity benefits across the business."

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ii round-up:

Rio Tinto Ordinary Shares (LSE:RIO) today maintained full-year sales and cost expectations despite early year weather disruption and the potential for higher diesel costs following the conflict in the Middle East. 

Production of Australian Pilbara iron ore rose 13% in the first quarter year-on-year to 78.8 million tonnes (mt), although two cyclones reduced shipments by 8 mt. Sales of 72.4 million tonnes was shy of analyst expectations.

Copper output of 229 kilo tonnes (kt) was up a better-than-expected 9%, driven by a ramp-up at its now expanded Oyu Tolgoi mine in Mongolia. 

Shares in the FTSE 100 company rose 0.5% in early UK trading, but drifted lower through the session. They came into this latest news up by close to a quarter so far in 2026. Fellow diversified miner Glencore (LSE:GLEN) is up by just over a third during that time. The FTSE 100 index is up by close to 7% year-to-date.  

Rio's operations include iron ore mines in Australia, copper operations in the US, Chile and Mongolia, aluminium extraction in Canada, and lithium mining in Argentina. 

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Despite flagging the use of 1.6 billion litres of diesel per year, with most in Australia, factors such as scale and global supply chain leverage allowed Rio to maintain expected annual Pilbara related unit cash costs at between 23 and 25 US dollars per metric tonne.   

Iron ore largely from Australia generates almost half of Rio’s profits, with copper almost a third. 

Rio continues to expect shipments of Australian Pilbara iron ore of between 323 mt and 338 mt in 2026 compared with 326.2 mt in 2025. 

Copper related developments included the start of drilling at its BHP joint venture Resolution mine in the USA, flagged by Rio as one of the world’s largest untapped copper deposits. 

A second-quarter production update is scheduled for 14 July. 

ii view:

Under relatively new CEO Simon Trott, Rio has implemented a new operating structure. To simplify the business and aid shareholder value, Rio’s new structure comprises iron ore, copper, and aluminium and lithium, with other commodities such as borates and titanium placed under strategic review.

Geographically, China generated most sales in 2025 at 57%, with the USA 17%, and Japan and Europe almost 6% each.

For investors, soaring energy costs in the wake of the Middle East war may stoke inflation, keeping interest rates elevated and slowing global economic growth and commodity demand. Rio’s own energy costs are not to be ignored and the weather can hinder operations. A forecast price/earnings (PE) ratio around the three- and 10-year averages may suggest the shares are not obviously cheap, while trade tensions between its two biggest customers, China and the USA, could affect performance.

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More favourably, moves to increase production of commodities such as copper and lithium used under energy transition across products such as solar panels, wind turbines, and energy storage systems, are ongoing.  An initial $650 million of annualised cost savings has been achieved with more targeted. Rio previously summarised the balance sheet as strong with late December net debt of $14.4 billion (£10.7 billion) comparing to a stock market value of £120 billion, while group is focused on improving safety and its ESG (Environmental, Social and Governance) policy.

On balance, and despite ongoing risks, diversified exposure to core industry metals and a prospective dividend yield of around 4.8% will likely leave many investors interested. 

Positive

• Selection of different commodities mined
• Attractive dividend payment (not guaranteed)

Negative

• Uncertain global economic outlook
• The weather can impact performance

The average rating of stock market analysts:

Strong hold