Portfolio Update: Purchase of Rio Tinto (ASX: RIO)

Portfolio Update:
Purchase of Rio Tinto (ASX: RIO)

1st May 2025

Across the Australian Equity component of investor portfolios (Blend Tilt), we have bought Rio Tinto (ASX: RIO).

Rio is one of the world’s largest diversified mining companies. The main commodities it produces are Iron Ore, Copper, Aluminium & Lithium from major projects located across Australia, Chile, Mongolia, Canada, the United States & Argentina.

We are attracted to Rio for the following reasons:

It owns several world class tier 1 assets leading to quality, scale & cos
Diversification across both commodities and geographies
Systematically important producer of iron ore, copper & primary aluminium
Investment in R&D to help decarbonise and improve the efficiency of their businesses

Rio has three key levers for value creation:

Low operating costs given its position on the cost curve
Increasing operational reliability
Low carbon Aluminium

First, Rio’s Tier 1 assets are generally located in the bottom quartile of the global cost curve. Using Iron Ore as an example, this means their production costs are amongst the lowest 25% of all iron ore producers globally. Since like-for-like grades are generally the same price across the market, this means Rio generates greater profits than most competitors selling the same product. This is important because even if commodity prices were to decline in a period of slowing global growth, Rio is likely to remain profitable and generate solid cash flow to help fund growth plans and dividends to shareholders.

Second, operational reliability has improved following the rollout of the Safe Production System across the business. This framework has benefits such as improved workplace health and safety and asset efficiency. Over time, this should increase the reliability of production and reduce costs.

Finally, in the extremely energy intensive aluminium manufacturing industry, Rio’s Canadian business is unique in that the electricity used is supplied by hydropower plants that the company owns. This significantly reduces the emissions from this operation versus peers globally, a critical advantage in a world focused on climate change and where carbon costs are expected to steepen the industry’s cost curve. Over the longer term, this is a valuable strategic asset to the business. The company’s aluminium business more broadly also stands to benefit from potential substitution of copper in high-price periods driven by the energy transition underway.

We have funded the purchase of Rio Tinto via sale of Aurizon (ASX: AZJ).

As always, thank you for your ongoing support, it is very much appreciated. If you have any questions or would like more information, please contact your adviser.

Warnings and disclosures

This material has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this material is General Advice and does not take into account any person’s individual investment objectives, financial situation or needs. Before making an investment decision based on this advice you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Where the General Advice relates to the acquisition or possible acquisition of a financial product, you should obtain a Product Disclosure Statement (“PDS”) relating to the product and consider the PDS before making any decision about whether to acquire the product. You will find further details of the service we provide and any cost to you within the Financial Services Guide. Any references to past investment performance are not an indication of future investment returns. Prepared by EP Financial Service Pty Ltd ABN 52 130 772 495 AFSL 325 252 (“Elston”). Although every effort has been made to verify the accuracy of the information contained in this material, Elston, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information.