Jefferies-Rio Tinto Iron Ore Shipments Miss, but Otherwise a Solid Quarter Operationally for Rio-20250715

Rio's 2Q Pilbara iron ore shipments fell short of our expectation and consensusalthough production was better than we had expected. SP10 accounted for 29%of shipments once again in 2Q. Rio's copper segment was a highlight in 2Q withmined production +9% y/y and significantly beating our expectation. Changesto copper guidance for the year are positive. Finally, aluminum volumes were inline with our expectation while bauxite beat.

Iron Ore: Rio's 2Q iron ore production of 83.7mt (100% basis) increased by 5% y/y and hit aseven-year-high, but shipments of 79.9mt fell 1% vs 1Q24, missing our expectation of 81.6mtand consensus of 81.9mt. Production exceeded shipments by 3.9mt due to port maintenance in2Q. SP10 accounted for 29% of Pilbara shipments once again in 2Q. Full-year iron ore shipmentsguidance is unchanged as Rio continues to target the lower half of the original 323-328mt guidancerange following a challenging 1Q due to cyclones. Full-year unit cost guidance of $23-$24.50/wmt isalso unchanged. Realized prices fell from $97.3/wmt in 1H24 to $82.5/wmt in 1H25 (vs benchmarkavg of $101/dmt in 1H25). Overall, Pilbara results were slightly worse than we had expected, but notmaterially so. Note separately that Simandou is progressing ahead of schedule, with first shipmentnow expected in November.