Rio Tinto ADR

Rio Tinto’s business remained resilient in the last quarter and the company successfully entered the year with quite a good operational momentum, particularly in Pilbara iron ore. The results of the quarter demonstrate the focus on controllable and resilience of its operations. However, accelerating cost inflation and lower prices throughout the year led to margin compression. As the property market worsened in China, steel demand was impacted. Rio Tinto increased resourcing in the Pilbara to support the ramp-up of Gudai-Darri and additional resources in system reliability and pit health and higher evaluation costs at Rincon and Simandou as activities accelerate. The iron ore business of the company has turned the corner operationally. Aluminum was more challenged both in terms of the markets and operationally. Markets have recovered, and the longer-term outlook for the industry is positive. At Simandou, Rio Tinto incorporated the infrastructure joint venture with its various partners and the government of Guinea. The acquisitions of Rincon and TRQ will be adding tones of materials required to the energy transition. This will also strengthen the company’s ability to deliver strong returns in the long term. Along with the acquisition of TRQ, Rio Tinto is able to work closely together to ensure every shareholder benefits from Oyu Tolgoi. We give Rio Tinto a ‘Hold’ rating with a revised target price.