Rio Tinto Q2: Solid Output, Neutral Rating on Valuation

Rio Tinto Group (RTNTF) reported a solid second quarter, with iron ore shipments from its Pilbara operations coming in at 80.3 million tonnes, up 2% from a year earlier and in line with analyst estimates. Copper production also rose, climbing 13% to 171,000 tonnes, driven by higher grades at the Oyu Tolgoi mine in Mongolia.

The company kept its full-year guidance unchanged, targeting 323-338 million tonnes of iron ore shipments and 660-720,000 tonnes of copper. Rio Tinto said it expects to maintain its cost guidance of $21-23 per tonne for Pilbara iron ore, even as labor and energy costs remain elevated.

What keeps the stock from a more bullish call is the valuation. Rio Tinto trades at roughly 9.5 times forward earnings, a premium to BHP Group's 8.8 times and a discount to the broader mining sector's 11 times. The dividend yield, at about 5.5%, is attractive but not enough to justify a higher multiple given the lack of near-term catalysts for iron ore prices, analysts said.

China's steel output, which drives about 70% of Rio Tinto's revenue, has been flat to slightly lower this year as the property sector remains weak. The country's crude steel production fell 1.1% in the first half of 2025 versus the same period last year, according to data from the China Iron and Steel Association. That has kept iron ore prices in a tight range around $100-$110 a tonne, limiting upside for producers.

Rio Tinto's Alpha Score sits at 62 out of 100, a Moderate rating that reflects the company's solid operational performance offset by the valuation and macro headwinds. The score is in line with the Basic Materials sector average.

The next catalyst to watch is the company's half-year earnings report, due Aug. 1. Analysts expect underlying EBITDA of about $12.5 billion, down from $13.2 billion a year earlier, reflecting lower iron ore prices. The dividend announcement will also be in focus, with the market expecting a payout of roughly $1.80 per share.