Rio Tinto now expected to refocus, Swiss bank ups earnings assumptions

Core Viewpoint - Rio Tinto is refocusing its strategy after UBS resumed coverage with a 'Neutral' rating and increased its 12-month price target to 6,900p from 5,800p, despite shares trading at 7,051p [2] Group 1: Earnings and Financial Projections - UBS raised its earnings assumptions for Rio Tinto, upgrading 2026E EBITDA by 7% and 2027E by 4%, reflecting higher lithium price assumptions and upgrades to precious metals prices [3] - The changes in earnings assumptions are also influenced by Rio's fourth-quarter production report released on January 21 [3] Group 2: Strategic Focus and Operations - With takeover speculation set aside, UBS expects Rio Tinto to concentrate on becoming "a Stronger, Sharper and Simpler organisation," targeting a 40-50% uplift in EBITDA by 2030 and around 3% annual organic growth, primarily driven by Simandou, OT, and lithium [4] - The company plans to exit non-core operations and infrastructure such as TiO2 and borates while maintaining a 60% dividend payout [4] - The discussions with Glencore highlighted Rio's ambition to increase its exposure to copper through organic options and potentially selective M&A [4] Group 3: Takeover Speculation - Rio Tinto decided against pursuing a takeover of Glencore after due diligence revealed significant differences in price and governance expectations, with Glencore seeking about 40% of the combined entity and Rio wanting to retain the chairman and CEO roles [5]