Rio Tinto (RIO, Financial) has sealed a binding agreement with Codelco to establish a joint venture aimed at developing a high-quality lithium project in Chile's Salar de Maricunga. Through this partnership, RIO will take a 49.99% stake in Salar de Maricunga SpA by financing research and development expenses. The investment plan includes an initial $350 million for further studies and analyses to advance the project to a final investment decision.
Once the project progresses, RIO will contribute an additional $500 million for construction, contingent upon receiving the green light to proceed. This investment is expected to occur before the decade ends. If the joint venture meets its target of producing first lithium by the end of 2030, an extra $50 million will be invested. Further funding will be aligned with each partner's ownership stake in the venture.
The initiative aims to incorporate state-of-the-art Direct Lithium Extraction technology while fostering community engagement and infrastructure development. The deal is projected to finalize by the close of the first quarter of 2026, pending regulatory approvals and standard closing conditions.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 5 analysts, the average target price for Rio Tinto PLC (RIO, Financial) is $80.03 with a high estimate of $94.00 and a low estimate of $72.13. The average target implies an upside of 28.75% from the current price of $62.16. More detailed estimate data can be found on the Rio Tinto PLC (RIO) Forecast page.
Based on the consensus recommendation from 7 brokerage firms, Rio Tinto PLC's (RIO, Financial) average brokerage recommendation is currently 1.4, indicating "Buy" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Rio Tinto PLC (RIO, Financial) in one year is $61.55, suggesting a downside of 0.97% from the current price of $62.155. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Rio Tinto PLC (RIO) Summary page.
RIO Key Business Developments
Release Date: February 19, 2025
- Underlying EBITDA: Down 2% to $23.3 billion.
- Operating Cash Flow: Increased 3% with a 67% EBITDA cash conversion rate.
- Net Debt: Ended the year at $5.5 billion.
- Capital Investment: Rose to $9.5 billion.
- Ordinary Dividend Payout: 60% payout, equating to $6.5 billion.
- Iron Ore EBITDA: Over $16 billion in 2024.
- Unit Costs for Iron Ore: $23 a tonne, with a 3% increase expected this year.
- Aluminum Product Group EBITDA: 61% increase.
- Copper Unit Costs: Down 4% on 2023.
- Production Growth: Copper-equivalent production up 1% in 2024.
- Exploration and Evaluation Costs: $300 million lower.
- Emission Reduction: 14% reduction between 2018 and 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rio Tinto PLC (RIO, Financial) reported a 3% increase in net operating cash flow, supported by strong performances in copper and aluminum.
- The company maintained a 60% payout for the ordinary dividend, marking the ninth consecutive year at the top end of the range.
- RIO's strategic diversification into copper, aluminum, and lithium is progressing well, with significant growth expected from projects like Oyu Tolgoi and Simandou.
- The company has shown resilience in maintaining profitability despite an 11% decline in iron ore prices, thanks to its diversified portfolio.
- RIO's decarbonization efforts are on track, with a 14% reduction in emissions from 2018 to 2024, and a commitment to further reduce emissions by 50% by 2030.
Negative Points
- Underlying EBITDA decreased by 2% to $23.3 billion, primarily due to lower iron ore prices.
- The property sector, particularly in China, remains weak, impacting steel demand and consequently iron ore sales.
- RIO faces challenges with weather conditions in the Pilbara, which have affected production and may continue to impact operations.
- There are concerns about the impact of potential tariffs on aluminum exports from Canada to the US, which could affect profitability.
- The company is dealing with operational challenges at IOC and the need for further improvements to achieve stability.
