Rio Tinto (NYSE:RIO) is initiated Friday with a Buy rating at Goldman Sachs, which says the company offers the best near-term production growth among diversified global miners while also trading at a compelling valuation.
Goldman sees Rio (RIO) as “a free cash flow and production growth story,” with forecast 5%-6% copper equivalent production growth in 2024-25 while peers are flat to declining, driven by the low-cost ramp-up of the Oyu Tolgoi copper mine in Mongolia and a recovery in volumes elsewhere in bullish commodities copper and aluminum.
Rio’s (RIO) balance sheet should comfortably fund its organic growth pipeline, leaving room to explore external growth opportunities or sustain high shareholder returns, Goldman said.
Goldman also started Glencore (OTCPK:GLCNF) (OTCPK:GLNCY) at Buy, saying the company offers “one of the lowest capital intensive organic copper growth opportunities,” a potential it believes the market currently undervalues.
“We believe Glencore’s current portfolio, supported by ~10% FCF yields over the next few years, can fund copper growth, with the existing coal portfolio contributing significantly to group FCF,” Goldman analysts wrote.
The bank rates BHP (BHP) as Neutral, praising robust free cash flow and copper optionality but seeing the stock as fairly valued.