Following up on the bullish copper and Freeport reports, “A new copper bull market takes shape” and “The miners are looking up,” Rio Tinto (NYSE:RIO) stands out as an asymmetric risk/reward opportunity.
Rio Tinto
In terms of copper, Rio Tinto offers one of the most robust profiles with over 100% production potential visible into 2030. The company is unique in the mining sector in that it operates world-class assets across three commodities: copper, aluminum, and iron ore. Rio’s portfolio is covered in the following reports:
- “Rio Tinto is a perfect portfolio diversifier”
- “Rio Tinto is an asymmetric global growth opportunity”
As the previous reports reviewed Rio in detail, and the fundamentals remain unchanged, I will focus on the tactical considerations here. The following table from “Rio Tinto is a perfect portfolio diversifier” provides a recent breakdown of Rio’s business mix by commodity for reference.
Created by Brian Kapp, stoxdox
Iron ore is and will remain the primary driver of Rio’s results, with 2021 EBITDA near $28 billion. The company’s total EBITDA near $40 billion is quite impressive. Rio’s leadership position in iron ore is similar to Newmont Corporation’s (NYSE:NEM) leadership in gold. As a result, using Newmont as a valuation comparable quantifies the size of the relative opportunity.
Source: Seeking Alpha. Created by Brian Kapp, stoxdox
As Rio offers peer-leading copper growth potential, an industry leading aluminum portfolio, and arguably the top iron ore assets in the world, a valuation in line with Newmont is a reasonable expectation. Based on this, the upside using 2025 consensus estimates is 160% or $192 per share.
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