ii view: Rio Tinto rewarded for efficiency drive in positive update

First-half and second-quarter production update to 30 June

• First-half Australian Pilbara iron ore production up 6% to 162.3 million tonnes (mt) from a year ago
• Second-quarter copper production down 7% year-over-year to 213 kilo tonnes (kt)

Guidance:

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

Chief Executive Simon Trott said:

"We are delivering growth as we drive performance across the group. Our scale, geographical diversification and sophisticated supply chains continue to underpin our resilience and strong operational performance despite ongoing geopolitical uncertainty throughout the period.

"We are driving a step-change in operational performance to deliver industry leading returns and growth for our shareholders."

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ii round-up:

Rio Tinto  Ordinary Shares (LSE:RIO)'s efficiency drive today shone through, with the diversified miner reporting its highest first half iron ore production from the Australian Pilbara region since 2018.

Second-quarter Pilbara iron ore output of 83.5 mt exceeded City hopes of 82.7 mt, leaving half-year production up 6% at 162.3 mt. Copper output of 213 kilo tonnes (kt) missed analyst forecasts of 216 kt, although with accompanying gold production and the high price of the precious metal helping lower annual copper cost guidance to 30-50 cents per pound (c/lb) from a previous 65-75c/lb.

Shares in the FTSE 100 company were little changed in UK trading having come into this latest news up by close to a fifth so far in 2026. That’s similar to both Anglo American (LSE:AAL) and Antofagasta (LSE:ANTO). The FTSE 100 index is up by around 5.5% year-to-date.

Iron ore, largely from Australia, generates almost half of Rio’s profits, with copper generating close to a third. The London headquartered miner continues to ramp up copper output at its now expanded Oyu Tolgoi mine in Mongolia.

Similarly, lithium production, used widely in batteries, rose 20% in Q2 to 14.6 kt, aided by first production at its Sal de Vida and Fénix mines in Argentina.

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

Second-quarter aluminium production of 841 kt fell marginally shy of City hopes at 847 kt. Rio left annual production forecasts for all commodities unchanged. 

First-half results are scheduled for 28 July.

ii view:

Under chief executive Simon Trott, Rio has moved to a new operating structure. To simplify the business and aid shareholder value, Rio’s new structure comprises Iron Ore, Copper, and Aluminium & 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 other major markets Japan and Europe each at close to 6%.

For investors, renewed Middle East tensions and high energy prices may again pressure global inflation, potentially leaving interest rates higher for longer and hindering commodity demand. The wide use of diesel leaves Rio’s own energy costs in focus. 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 ongoing trade tensions between its two biggest customers - China and the US - could hinder future performance.

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On the upside, management’s efficiency drive looks to be paying off. Moves to increase production of commodities such as copper and lithium used in energy transition across products such as solar panels, wind turbines, and energy storage systems, are ongoing. 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 £112 billion, while group actions to improve safety and ESG (environmental, social and governance) policy continue.

In all, and while risks remain, diversified exposure to core industry metals and a forecast dividend yield of over 4% offer grounds for continued interest.  

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:

Hold