Jefferies Financial Group Inc. maintains a neutral rating on Rio Tinto plc Sponsored ADR (RIO.US): Risk-reward balanced, copper and aluminum relatively optimistic.

Jefferies Financial Group Inc. recently released an equity research report on Rio Tinto plc Sponsored ADR (RIO.US), focusing on the investment value, business layout, and risk-return prospects of this global mining giant. The core conclusion shows that the current stock risk and return of Rio Tinto plc Sponsored ADR are balanced, with its lithium business being a key growth engine but also facing multiple risks such as strategic and political risks from GEO Group Inc. The company is given a "neutral" rating with a target price of 5788 pence per share. Field visit summary of Argentine lithium mine The company participated in on-site visits to the Rincon and Fenix lithium mine assets organized by Rio Tinto plc Sponsored ADR (RIO) and held meetings with local company representatives and Argentine government officials. This visit further strengthened the company's gradually optimistic view of the development vision of Rio Tinto plc Sponsored ADR's lithium business. The company still believes that this business segment will benefit investors from the continuous rise in commodity prices, and the expansion plans will also bring substantial profit contributions to the company in the medium term. Controlling capital expenditure In addition to the promised $2.8 billion capital expenditure before the 2029 fiscal year, the lithium business sector of Rio Tinto plc Sponsored ADR needs to compete for subsequent funding support in the company's overall investment portfolio. If there is a significant overspending on capital expenditure, the subsequent measures are not yet clear. Although the sector has planned growth projects after this time frame, planning to increase capacity of carbonate lithium equivalent (LCE) production from 200,000 tons per year to about 370,000 tons per year LCE, the company believes that unless there is a substantial and sustained improvement in the lithium market, these projects will be difficult to advance. Rincon project resin selection is still in progress The core of the Direct Lithium Extraction (DLE) process is to match the resin with the underlying brine's chemical properties. Although the process flow has been designed based on the basic chemical properties, the project is still looking for the optimal resin solution - considering that this will have a chain effect on the parameters of the adsorption column, which slightly surprises the company. Integration work continues Following the acquisition of Arcadium in March 2025, the integration of the Argentine lithium business seems to be progressing smoothly but has not yet fully landed. Preliminary knowledge sharing initiatives and synergies have been identified, with further integration opportunities in the future to unlock additional value. Is the Argentine economy on the rise? The company held meetings with the President of the Central Bank of Argentina, the Minister of Mining, the Deputy Minister of Energy Resources, and other government officials. The core message conveyed by all parties was consistent: Argentina welcomes business investments and hopes to achieve long-term prosperity for the country through strengthening the federal balance sheet, with one of the key paths being to incentivize further development of national mining projects (such as through the Mining Investment Growth Law (RIGI) and amendments to the Glacier Law). The core of this policy framework is to maintain political stability, and the sustained economic momentum will support political stability. The company is impressed by the opportunities in the Argentine mining sector - currently, approximately 60% of public opinion in the country supports mining development, but it is also necessary to address its volatile political history. Therefore, for a more comprehensive view, the company recommends referring to the analysis of the team within Jefferies Financial Group Inc. who have extensive experience in the broader Latin American region (such as Alejandro Anibal De Chimelis, among others). Investment arguments/differentiated views Compared to market consensus, the company's view on iron ore is not as pessimistic, more optimistic about copper and aluminum, but the company believes that the strategic risks, capital allocation risks, and political risks from GEO Group Inc. have increased recently for Rio Tinto plc Sponsored ADR, and the risk/return balance of its stock is currently at a balance. The company maintains a "neutral" rating for Rio Tinto plc Sponsored ADR stock, mainly based on two points: first, the company's current free cash flow (FCF) is relatively low; and second, the political risks in Guinea and Mongolia remain high. However, the analysis also shows that the stock has long-term investment value. Based on a Net Present Value (NPV) model, the company's valuation for Rio Tinto plc Sponsored ADR UK-listed company (RIOLN) is 5788 pence per share. Based on a Net Present Value (NPV) model, the report provides three target prices for three scenarios: under the base scenario, RIOLN 5700 pence (-8%), RIOAU 143 Australian dollars per share, RIOUS 76 US dollars per share, corresponding to the expectation of a recovery in commodity prices after short-term fluctuations in 12 months; under the upside scenario (strong global economic recovery), the target prices are 7000 pence (+13%), 175 Australian dollars per share, 90 US dollars per share; under the downside scenario, that is, in the context of weak demand for Chinese steel and a downturn in global economy, they fall to 3750 pence (-39%), 100 Australian dollars per share, 52 US dollars per share. Key catalysts affecting stock prices include unexpected demand for Chinese iron ore, improved operational performance, as well as global growth weakness and operational issues leading to production decline.