Rio Tinto share price lifts despite lukewarm iron ore outlook

The Rio Tinto Ltd (ASX: RIO) share price is on the move on Thursday morning.

At the time of writing, the mining giant’s shares are up 2% to $111.73.

Why is the Rio Tinto share price rising?

Investors have been buying the miner’s shares this morning after responding positively to its strategy update.

This includes an update on the progress it is making against its long-term strategy to strengthen the business, grow in a decarbonising world, and continue to deliver attractive shareholder returns.

In respect to growing in a decarbonising world, Rio Tinto believes it is well-positioned to benefit from the megatrend. In fact, it estimates that the energy transition could add as much as 25% in new demand above traditional sources on a copper equivalent basis across the miner’s key products by 2035.

In order to meet this demand, the company is targeting an investment of up to US$3 billion per year in growth. This includes investments in the Oyu Tolgoi copper, Rincon lithium, and Simandou iron ore projects.

Rio Tinto will also be working hard to decarbonise its own operations. It has outlined projects that are underway to meet challenging decarbonisation targets to halve Scope 1 & 2 emissions by 2030, before reaching net zero by 2050.

Six large emissions abatement programmes are focused on renewable power, process heat, diesel and the Elysis zero carbon aluminium smelting technology to drive the transition to net zero.

Investments of around US$7.5 billion are expected between 2022 and 2030, including around $1.5 billion over the next three years which will be back-end dated. Management advised that these investments are being prioritised and phased in the most logical way, with consideration for near-term work around energy inputs and attractive economics.

‘A stronger Rio Tinto’

Rio Tinto’s chief executive, Jakob Stausholm, believes the company will be stronger in the coming years thanks to its strategy. He commented:

We are now creating real momentum, to build a stronger Rio Tinto that is a platform for delivering long-term value. From evolving our culture, to operational improvements, a different approach on cultural heritage, and technology breakthroughs to address climate change and a changing customer environment, we are seeing early results that give us conviction we have the right objectives, the right team, and the right strategy. This is all captured in our newly defined purpose: finding better ways to provide the materials the world needs.

Meeting the incremental demand of the energy transition and ensuring local supplies of critical minerals globally deepens our relevance in the world and provides new opportunities. We are working hard to decarbonise our assets and products, as we invest to grow in materials needed for the energy transition. “The quality of our assets, resilience of cashflows and strength of our balance sheet ensure we are well positioned to continue to invest with discipline for the long term and deliver attractive returns to our shareholders throughout the cycle.

Production guidance for FY 2023

Rio Tinto has also provided the market with its production guidance for FY 2023.

It revealed that it is targeting Pilbara iron ore shipments (100% basis) of 320Mt to 335Mt. This is in line with what the company guided to originally for FY 2022 before wet weather hampered its performance and led to a slight amendment. It now expects to achieve the low end of this guidance range in 2022.

Other highlights for FY 2023 include a small increase in alumina production to 7.7Mt to 8Mt (from 7.6Mt to 7.8Mt) and aluminium production of 3.1Mt to 3.3Mt (from 3Mt to 3.1Mt).

The post Rio Tinto share price lifts despite lukewarm iron ore outlook appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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