Rio Tinto: Solid Iron Ore Sales and Short-Term Price Tailwinds Keep Optimism High

We retain our AUD 112 per share fair value estimate for no-moat Rio Tinto after a solid start to 2024. First-quarter sales are broadly in line with our expectations. Rio’s share of shipments from its Pilbara iron ore operations, the main driver of earnings, was roughly 66 million metric tons, 5% below the same quarter of 2023 and 10% lower than the previous quarter. Inclement weather was the main driver. Management made no changes to guidance, and we continue to forecast 2024 Pilbara iron ore sales of roughly 280 million metric tons (its share), similar to last year. We also reiterate our forecast for 2024 unit cash costs in the Pilbara of roughly USD 23 per metric ton, about 6% higher than last year, driven by inflation.