The shares of diversified mining giant Rio Tinto (NYSE: RIO) has gained 5% year to date, outperforming the S&P500 index which has grown 3% during the same period. Rio Tinto is making a significant push into lithium to strengthen its position in the battery metals market. The company recently announced a $2.5 billion investment to expand its Rincon lithium project in Argentina, aiming to increase production capacity to 60,000 tonnes per year of battery-grade lithium carbonate. The mine, located in Argentina’s “lithium triangle,” is expected to have a 40-year lifespan, with production starting in 2028 and full capacity reached by 2031.
Additionally, Rio Tinto recently completed a $6.7 billion acquisition of Arcadium Lithium, positioning itself as the world’s third-largest lithium miner after Albemarle and SQM. The acquisition gives Rio a stronger foothold in Asia, where 84% of Arcadium’s revenue is generated, benefiting from rising demand for electric vehicle batteries.
This lithium expansion aligns with Argentina’s pro-investment policies, including tax incentives and regulatory stability for large foreign investments. However, the move comes amid weaker lithium prices, driven by oversupply from China and slowing EV demand, which has led other lithium projects to be delayed or canceled.
Overall, the performance of RIO stock with respect to the index over the last 4-year period has been quite volatile. Returns for the stock were -1% in 2021, 18% in 2022, 11% in 2023, and -15% in 2024.
The Trefis High Quality Portfolio, with a collection of 30 stocks, is less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period.
Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could RIO face a similar situation as it did in 2021, 2023 and 2024 and underperform the S&P over the next 12 months – or will it see a strong jump?
Rio’s Q4 2024 operational results showed mixed performance across its key commodities. Pilbara iron ore production was 86.5 million tonnes, while shipments totaled 85.7 million tonnes, reflecting a 1% decline year-over-year due to depletion at certain sites and a transition to the Western Range mine. Mined copper production surged 13% year-over-year to 697,000 tonnes, driven by the ramp-up of Oyu Tolgoi underground operations and better ore grades at Escondida. Q4 alone saw 202,000 tonnes, a 26% increase from Q4 2023. While the company continues to focus on growth in battery and renewable materials, we currently value Rio Tinto stock at about $77 per share, which is 25% ahead of the current market price.
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