Last week, mining giant Rio Tinto (RIO) opened the doors to its Oyu Tolgoi construction site to analysts, keen to show off its progress. The Mongolian copper mine is a mammoth operation, and will likely drive Rio’s earnings for decades to come, but had been plagued by delays and cost overruns for years.
Analyst updates following the site visit include a potential bump in gold production in 2025 (500,000 ounces compared with the long-term trend of 350,000 ounces a year), and slightly higher copper production than previously expected in 2025 and 2026. “Rio Tinto has impressive copper growth options,” said RBC Capital Markets analyst Tyler Broda. “We see the equity story, especially with Oyu Tolgoi, helping to offset the profitability impact from [an] expected fall in iron ore increasingly compelling.”
Meanwhile, Rio has also released its June quarter production numbers. Iron ore is likely to hit the “upper half” of the production guidance for the full year, even though the company missed the consensus forecast for first-half production after a train derailment.
It reported 79.1mn tonnes for the quarter, compared to the forecast of 81.8mn tonnes. It has also raised its full-year cost guidance for the copper division to between 180¢ (139p) to 200¢, compared with 160¢-180¢ previously, due to a delay in rebuilding the smelter at the Kennecott mine in the US. Inflation also looked to impact the company’s lithium project in Argentina, Rincon, with the $140mn budget for this year now under review.
Rio will publish its half-year results next week, but provided some guidance in the production update: cash flow will take a hit from a $900mn working capital build, while a lower dividend from the Escondida mine will also have an impact, given it is half what was paid last year.
The positive update from Mongolia points to swifter benefits from the mine than anticipated, but in the short term Rio’s earnings are reliant on China pushing for more growth and thereby sending iron ore prices up.
