Copper Emerges as Key Driver in Rio Tinto's Strategic Shift

Rio Tinto's copper earnings now make up 30% of total profits, driven by Oyu Tolgoi. The company is reshaping its portfolio with a major lithium investment while iron ore faces cost pressures.

Rio Tinto is undergoing a significant strategic realignment. As its traditional iron ore business faces headwinds, copper is rapidly advancing as a primary earnings contributor. A recent lithium transaction in Canada further underscores this evolving focus. However, the resilience of this transition is being tested as the company's core operations grapple with rising costs.

Copper Gains Momentum as Iron Ore Falters

The most striking development in Rio Tinto's latest financial report is the substantial rise of copper. The underlying earnings from copper surged to $7.4 billion, now accounting for approximately 30% of the group's total earnings. This growth was fueled by a 17% increase in realized copper prices and an 11% boost in production volume. A standout performer was the Oyu Tolgoi mine in Mongolia, where output skyrocketed by 61% as the operation continued its ramp-up. The company also confirmed the completion of the underground development project at the site, marking a crucial operational milestone.

In contrast, the iron ore segment, while still the largest contributor, showed signs of strain. Its share of underlying earnings declined to around 60%, down from 70% the previous year. Iron ore profits fell by 7.6%, attributed to slightly lower shipments from the Pilbara region (-1%) and realized prices that were about 8% lower. Weakness in China's property market was cited as a contributing factor. Compounding the issue, unit costs in Pilbara increased by roughly $0.50 per tonne, with further cost inflation to $23.50-$25.00 per tonne projected for 2026.

Financial Performance and Portfolio Reshaping

For the full year 2025, Rio Tinto reported a largely unchanged underlying profit of $10.87 billion, slightly below market expectations of $11.03 billion. Net profit attributable to shareholders declined by 14% to $9.97 billion. Meanwhile, revenue increased by 7% to $57.64 billion, and underlying EBITDA rose by 9% to $25.4 billion, indicating mixed operational performance.

The company is actively reshaping its portfolio. Just one day before releasing its results, Rio Tinto announced it had acquired a 53.9% majority stake in Nemaska Lithium in Quebec, with the provincial government retaining 46.1%. The objective is to establish an integrated lithium supply chain in North America. Further investment is planned, with Quebec committing up to an additional $200 million and Rio Tinto earmarking over $300 million for 2026 to expand lithium activities in the province. Initial production at the Becancour lithium hydroxide plant is anticipated in 2028.

Concurrently, Rio Tinto aims to generate $5 to $10 billion in cash through asset disposals. Potential sales include market testing for its borates and titanium dioxide businesses, as well as the monetization of certain infrastructure assets.

Guidance for the Coming Year

Looking ahead to 2026, Rio Tinto's production guidance reveals its dual focus. Iron ore shipments are forecast to be between 343 and 366 million tonnes, up from 342 million tonnes in 2025. Copper production, however, is expected to be more modest, projected at 800,000 to 870,000 tonnes, compared to 883,000 tonnes achieved in 2025.

Market reaction to these developments has been muted. Shares closed at €82.30 on Friday, remaining just below the 52-week high of €83.85 marked earlier in the week.