ii view: Rio Tinto misses City production forecasts

Third-quarter production update to 30 September

• Australian Pilbara iron ore production of 84.1 million tonnes (mt), up 0.5% from Q2
• Copper production of 204 kilo tonnes (kt), down 11% from Q2

Guidance:

• Continues to expect full year 2025 Australian Pilbara iron ore shipments of between 323 and 338 mt

Chief Executive Simon Trott said:

"Safety remains our number one priority. We are deeply saddened by the tragic death of Mohamed Camara at the SimFer mine site and are committed to learning across our business to prevent future incidents. This has been a time for huge reflections on safety across the group.

"We continue to strengthen performance from our assets, setting back-to-back quarterly production records in our bauxite business and at Oyu Tolgoi - where the underground ramp-up remains on track to boost copper output by more than 50% this year. 

"We are focused on delivering a strong finish to the year from the Pilbara. Our growth projects are also progressing at pace - at Simandou, we started loading first ore at the mine for movement down the rail and to the port in October.

“We will continue to deliver further shareholder value through operational excellence, simplification and discipline on performance and capital investment."

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

ii round-up:

Rio Tinto Ordinary Shares (LSE:RIO) today detailed production at its two biggest profit generators that marginally missed City hopes, although the diversified miner broadly maintained full-year production forecasts. 

Third-quarter Australian Pilbara iron ore production to late September of 84.1 million tonnes (mt) compared with the 84.7 million predicted by analysts. Iron ore generates around 60% of Rio Tinto’s profits. Copper production of 204 kilo tonnes (kt), which was hindered by maintenance at US operations, missed forecasts of 206 kt. Copper accounts for a quarter of overall group profit.

Shares in the FTSE 100 company fell 1% in UK trading having come into this latest news up by close to 8% so far in 2025. That’s similar to fellow iron ore focused rival BHP Group Ltd (LSE:BHP). The FTSE 100 index is up 14% 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. 

Third-quarter shipments of Rio’s core Australian Pilbara iron ore at 84.3 mt missed forecasts of 84.9 mt, although management still expects full-year shipments towards the lower end of a 323-338 mt range.

An expected small reduction in full year iron ore pellets and concentrate output was countered by an increase in forecasts for Bauxite, used in aluminium production. 

Rio pointed to modest improvement in the global economy during the quarter, although with business and consumer sentiment weakening due to ongoing trade tensions. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the update. A fourth-quarter production update is likely mid-January. 

ii view:

Under relatively new chief executive Simon Trott, Rio has implemented a new operating model and executive team. To simplify the business and aid shareholder value, Rio’s new structure comprises of  Iron Ore, Aluminium & Lithium; and Copper, with other commodities such as borates and titanium placed under strategic review. 

Geographically, China generated most sales in 2024 at 57%, with the USA at 17%, and other major markets Japan and Europe each at close to 7%. Fellow major miners include Glencore (LSE:GLEN), Anglo American (LSE:AAL), Antofagasta (LSE:ANTO) and Fresnillo (LSE:FRES). 

For investors, the weather can impact production, with early year iron ore output dented by cyclones. Attempts to navigate US trade tariffs have impacted standard operations, with shipping destinations for aluminium previously changed. An estimated price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap, while tensions between its two biggest customers, China and the USA, offer potential to hinder performance going forward.   

• The AIM miners that are this year’s hot stocks
• Are copper mining stocks in the firing line?
• eyeQ: Glencore shares - chase rally or keep powder dry?

More favourably, moves to increase production of commodities such as copper and lithium, an integral part of the energy transition across products such as solar panels, wind turbines, and energy storage systems, are ongoing.  Rio considered its previous acquisition of lithium miner Arcadium as counter-cyclical, with the price of lithium down more than 80% since its peak at the time of approach. Efforts to improve its environmental, social and governance (ESG) policy continue, while Rio previously summarised the balance sheet as strong, with late June net debt of $14.6 billion (£11 billion) comparing to a stock market value of £81 billion.

On balance, and despite ongoing risks, a consensus analyst estimate of fair value sat at over £55 per share and a forecast dividend yield of more than 5% offer grounds for continued long-term optimism.  

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:

Buy