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Rio Tinto PLC ADR RIO

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Morningstar’s Analysis

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5-Star Price

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Economic Moat

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Capital Allocation

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Iron Ore Price Rise More than Offsets Rio Tinto’s Modest Production Weakness

Mathew Hodge, CFA Regional Director

Analyst Note

| Mathew Hodge, CFA |

Rio Tinto’s fourth-quarter production was overall mildly softer than we expected. The company’s share of iron ore Pilbara shipments, the key earnings driver, finished the year at 268 million tonnes, slightly below our forecast. Shipments were down on 2020’s 273 million tonnes with headwinds from weather, delayed expansions and traditional owner relationships post the Juukan Gorge disaster. COVID-19 also reduced labour availability. The destruction of the caves sees the major Pilbara iron ore miners facing additional scrutiny around traditional owner relationships. This has slowed output and growth somewhat but has not materially impacted the value of Rio Tinto shares, given the supportive iron ore price has more than made up for the lower volumes. We expect the company and industry to improve its performance and work through the issues in time.

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Company Profile

Business Description

Rio Tinto searches for and extracts a variety of minerals worldwide, with the heaviest concentrations in North America and Australia. Iron ore is the dominant commodity, with significantly lesser contributions from aluminium, copper, diamonds, gold, and industrial minerals. The 1995 merger of RTZ and CRA, via a dual-listed structure, created the present-day company. The two operate as a single business entity. Shareholders in each company have equivalent economic and voting rights.

Contact
6 St James’s Square
London, SW1Y 4AD, United Kingdom
T +44 2077812000
Sector Basic Materials
Industry Other Industrial Metals & Mining
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 47,500

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