Rio Tinto Ltd (ASX: RIO) shares have been in the spotlight this week.
That's because the mining giant released its eagerly anticipated third quarter update on Tuesday.
Should you be buying its shares following this update? Let's see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the large-cap miner.
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What is the broker saying?
Macquarie was pleased with Rio Tinto's operational performance during the third quarter. This was especially the case with its Pilbara iron ore operations. It said:
Pilbara iron ore (100% basis) production/ shipments of 84.1/84.3mt were both in line with VA consensus (-1%). New Pilbara blend grade resulted in a reduction in SP10 from 29% to 9%. Guidance retained (lower end of the 323-338mt). RIO require 4QCY25 at 88mt to meet guidance. Unit costs guidance US$23.0-24.50/t unchanged. Lowering Pilbara blend grade could improve unit costs.
The broker was also pleased to see that the miner delivered copper production in line with expectations for the period. It adds:
Copper in line: Mined & refined copper of 204kt (consolidated basis) came in line (-1%) with Escondida's 110.7kt beat (+6%) flat QoQ, Oyu Tolgoi's 58.9kt (RIO share) delivering a small beat (+4%) with higher U/G production offset by Kennecott's maintenance impacted miss on both mined and refined copper (-42%/-58%).
Should you invest?
Rio Tinto remains the broker's preferred large-cap mining exposure. This is due to it having stronger short-term catalysts and opportunities to improve its unit costs. It said:
We continue to prefer RIO to BHP due to stronger short-term catalysts and cost improvement opportunities. RIO's portfolio simplification, capital discipline, and ramp-ups at Simandou and OT offer tactical upside. We note first ore was loaded onto rail in October with ramp-up tracking to plan despite fatalities. We believe RIO has room to improve unit costs following past operational setbacks.
However, despite preferring Rio Tinto over BHP Group Ltd (ASX: BHP), it doesn't necessarily mean that it thinks investors should be buying its shares.
According to the note, Macquarie has retained its neutral rating on the miner's shares with an unchanged price target of $115.00. This is lower than its current share price of $129.00 and implies potential downside of 11% over the next 12 months.
Commenting on its neutral recommendation, the broker said:
Neutral. RIO delivered a solid result with record 3Q iron ore shipments. Copper was assisted by strong grade performance from Escondida and OT ramp-up. All eyes move to the 2025 capital markets day, where we believe CEO Simon Trott will reinforce a simplified operating model and reduce costs.
