On Thursday, RBC Capital Markets adjusted its price target for mining giant Rio Tinto (LON:RIO) Plc. (NYSE:RIO:LN) (NYSE: RIO), reducing it from GBP55.00 to GBP54.00, while maintaining a Sector Perform rating on the stock.
The revision follows Rio Tinto's investor day where the company outlined its growth strategy, including an extended target for 3% compound annual production growth now reaching until 2033, previously set for 2028. This extension is partly due to the inclusion of lithium projects.
Rio Tinto's growth strategy is particularly focused on its lithium assets, with plans to establish three major sites in Argentina. These sites will capitalize on the Rincon project and the Arcadium assets. The company's forward-looking strategy reflects its aim to meet the rising demand for lithium, which is a critical component in batteries for electric vehicles and other technologies.
In addition to laying out growth targets, Rio Tinto also provided its maiden forecast for the financial year 2025. The guidance indicated downward revisions for earnings per share (EPS) and free cash flow (FCF) for that year. This is attributed to anticipated lower volumes of iron ore, copper, and alumina, alongside increased capital expenditure projections for the financial years 2025 and 2026.
The analyst from RBC Capital highlighted the updated guidance and noted that the revisions led to the decrease in the price target for Rio Tinto's shares. Despite the lower price target, the firm retained its Sector Perform rating, suggesting that Rio Tinto's stock is expected to perform in line with the average returns of the sector.
Rio Tinto is among the world's largest mining companies, producing a variety of minerals including iron ore, copper, and aluminum. The company's decision to focus on lithium reflects the broader industry trend of investing in commodities that are essential for modern technologies, particularly those related to renewable energy and electric vehicles.
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