The 2023 production guidance, announced in mid-January alongside Rio Tinto’s fourth-quarter output figures, shows the increased output for iron ore, copper, and alumina/bauxite. And the business is moving rapidly to construct a lithium test plant at the Rincon mine in Argentina, which it purchased last year – a critical step for Rio Tinto’s future.

I anticipate lithium will play a larger role in the company’s future. Rio Tinto reached an agreement with Ford in 2022 that might lead to the carmaker becoming a key customer for the miner’s Argentine lithium supply.

Rio Tinto is already a remarkable firm, divided into four divisions: iron ore (65% of first-half 2022 EBITDA), aluminum (18%), copper (9%), and minerals (8%). Minerals include salt, borates, mineral sands, and diamonds.

The company’s fantastic fourth-quarter earnings and improved forecast greatly impressed me.

Rio Tinto’s iron ore production of 89.5 million tons equates to a yearly production of over 350 million tons. The forecast for 2021 was 320 million to 335 million tons.

The corporation maintained its cost projection for 2022, and more exact figures will be provided next month. Iron ore guidance is likely to be raised at that time.

Rio Tinto increased its copper forecast for 2023 to between 650,000 and 710,000 tons after purchasing the minority shareholders in the Oyu Tolgoi holding firm Turquoise Hill Resources for $3 billion.

Rio Tinto produced 521,000 tons of copper last year.

For those who are unfamiliar with Oyu Tolgoi, it is a copper and gold deposit located in Mongolia’s South Gobi region.

It is one of the world’s largest known copper and gold resources. Oyu Tolgoi is planned to generate 500,000 tons of copper per year at full capacity.

The anticipated full reopening of China’s economy following several years of coronavirus pandemic-related lockdowns will significantly increase demand for what Rio Tinto and other miners produce. In 2021, China will account for almost 60% of Rio’s sales.

Rio Tinto also has a significant portfolio of assets with extended lives and low operating costs. That makes it one of the few miners capable of remaining profitable throughout the commodity cycle.

The majority of its ore comes from operations in the safe havens of Australia and North America.

Rio Tinto pays a regular dividend twice a year, in April and September, as well as a special payout on occasion.

The payout ratio targeted by management is 40% to 60% of underlying earnings.

The 2018 dividend was $4.08, consisting of $3.08 from the regular dividend and $1.00 from the special dividend.

The 2019 dividend was $4.43, which included a $3.82 regular dividend and a $0.61 special dividend. It paid a regular dividend of $4.64 and a special dividend of $0.93 in 2020. It paid total dividends of $13.49 per share in 2021.

Dividends are expected to be $8.00 in both 2022 and 2023. With China reopening, commodities prices are expected to rise in 2023. Rio and other miners will benefit from this.

I believe the dividend will be closer to $10.00 per share in 2023. Even if it is $8.00, the dividend yield would be greater than 10% based on the present stock price.

Rio Tinto is a good buy in the $70s per share range.

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