Goldman Sachs has moved Rio Tinto Plc from a "buy" to a "neutral" recommendation, lowering its 12-month price objective to £74 from £79. The brokerage said the change reflects the stock's substantial advance - roughly 60% higher over the past six months - which it views as leaving the shares trading at a full valuation.
The firm's valuation framework for the target uses an equal blend of a 1x net asset value (NAV) and a 5.5x enterprise value-to-EBITDA multiple. Under that approach Goldman Sachs reported NAV declining by 7% to £92.6 per share from £99.5, and noted the stock is trading at about 0.77x NAV. At a quoted share price of 7,122 pence, the £74 target implies an upside of approximately 3.9%.
Financial results and key operating metrics
Rio Tinto's reported 2025 underlying EBITDA was $25.4 billion and net profit after tax was $10.9 billion. Both figures missed Goldman Sachs' forecasts of $25.9 billion for EBITDA and $11.2 billion for net profit, and came in about 1% below Visible Alpha Consensus data. On a year-on-year basis, the company's EBITDA increased by 9%.
By commodity, aluminium underlying EBITDA was $4.4 billion, roughly $700 million below Goldman Sachs' estimate. The brokerage attributed the shortfall to higher costs in North American primary metals operations - even after removing tariff effects - as well as lower revenues from bauxite. Goldman noted primary aluminium costs rose by approximately 15% year-on-year.
Copper delivered stronger-than-expected results, with underlying EBITDA of $7.4 billion, about $400 million ahead of Goldman Sachs' projection. Goldman attributed the copper outperformance to robust showings at Escondida and Bingham Canyon. Iron ore results were in line with expectations, while Pilbara unit costs fell to $23.4 per tonne in the second half of 2025.
Balance sheet, capital spending and dividend
Net debt at year-end was $14.4 billion, above Goldman Sachs' estimate of $12.9 billion. The higher leverage position reflected larger-than-anticipated capital expenditure of $12.3 billion, which includes spending related to Simandou InfraCo and MineCo, versus Goldman Sachs' prior capex estimate of $11.4 billion.
The final dividend of 254 cents per share, representing a cash payout of $4.1 billion, equated to a 60% payout ratio for the tenth consecutive year and came in below Goldman Sachs' forecast of 269 cents per share.
Guidance and forecast changes
Rio Tinto left its 2026 production and capital expenditure guidance unchanged. Pilbara unit cost guidance is set at $23.5-$25 per tonne, compared with Goldman Sachs' internal estimate of $24.3 per tonne. Copper cost guidance of 65-75 cents per pound on a net credits basis compares with Goldman Sachs' estimate of 61 cents per pound. Total capex guidance for 2026 remains approximately $11 billion.
On the back of higher assumed aluminium costs, Goldman Sachs lowered its EBITDA forecasts for 2026, 2027 and 2028 by 2%, 1% and 2% respectively. The bank's new 2026 EBITDA projection is $27.1 billion, with an EPS estimate of $7.08. Goldman Sachs also flagged an expectation that aluminium and copper - which together account for roughly 40% of forecast 2026 EBITDA - will experience a pullback in the second quarter of 2026.
Goldman Sachs estimates Rio Tinto's spot free cash flow yield at about 6%, noting this is in line with BHP, which Goldman Sachs also rates as "neutral."
Other corporate developments and contingencies
Rio Tinto said it has received an additional tax assessment from the Mongolian Tax Authority of approximately $440 million covering fiscal years 2021 and 2022, on top of $438 million already paid to date. Goldman Sachs estimates that total potential additional payments now exceed $1 billion. The company maintained that the new assessments are inconsistent with the Oyu Tolgoi Investment Agreement.
Regarding discussions with Glencore, Rio Tinto's management stated the proposed transaction "was meant to be a full merger including GLEN's coal business, but did not stack up on value when compared to its compelling simplification strategy." In line with that simplification approach, the company has started market testing its borates and titanium dioxide assets as part of a $5-$10 billion non-core divestment programme. Management also outlined a $650 million annualised cost reduction target and a medium-term reduction to annual capex of roughly $1 billion, bringing medium-term annual capex to about $10 billion.
Share performance and analyst history
Over the past 12 months Rio Tinto's shares have gained 40.7%, outperforming a 16.7% rise for the FTSE World Europe index over the same period. Goldman Sachs has held a "buy" rating on the stock since initiating coverage in January 2024 prior to this downgrade to "neutral."
Goldman Sachs' move reflects a combination of the stock's sharp price appreciation, narrower upside to the revised target, and adjustments to near-term profit and cash flow expectations driven primarily by aluminium cost assumptions and elevated capital expenditure.
Note: This article presents reported figures, guidance and analyst estimates as disclosed by the company and Goldman Sachs. It does not introduce new forecasts or additional data beyond those figures.