DBRS Morningstar Confirms Rio Tinto Plc & Rio Tinto Ltd.’s Issuer Rating at “A” With a Stable Trend

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating on Rio Tinto Plc & Rio Tinto Ltd. (Rio or the Company) at “A” with a Stable trend. The confirmation is supported by the strength of the Company’s business risk profile, based on Rio’s significant size, long-life reserves, low-cost operations, and the expectations that the Company’s credit metrics should remain robust. The Stable trend reflects the Company’s solid financial outlook and strong liquidity position. At the end of 2022, the Company had approximately $16.3 billion in cash, cash equivalents, current liquid investments, and undrawn credit facilities that provide a significant cushion to counter the broader impact of events such as Russia’s invasion of Ukraine and the emerging liquidity crisis in the global banking system.

On March 29, 2022, Rio completed the acquisition of the Rincon lithium project in Argentina for $825 million. On July 21, 2022, Rio signed a non-binding memorandum of understanding with the Ford Motor Company (rated BB (high) with a Positive trend and RR4 recovery rating by DBRS Morningstar) as a foundation customer for Rincon’s future lithium production. As well, on December 16, 2022, Rio completed the acquisition of Turquoise Hill Resources Ltd. for approximately $3.1 billion. The acquisition increased Rio’s ownership of the Oyu Tolgoi mine to 66% from 34% and consolidated Rio’s control as the new underground operations are being ramped up with initial production announced on March 13, 2023.

On November 28, 2022, Rio and the Puutu Kunti Kurrama and Pinikura Aboriginal Corporation announced the creation of the Juukan Gorge Legacy Foundation with Rio providing financial support. The agreement continues Rio’s path to recovery from the tragic destruction of two ancient rock shelters at Juukan Gorge in May 2020 as part of its mining activities. While Rio has made progress in repairing its community relations, the Company continues to face governance challenges as outlined in the external report released by Rio in February 2022. As part of these challenges, on November 16, 2022, Rio announced a partnership with BHP Group Limited (BHP; rated “A” with a Stable trend by DBRS Morningstar) and Fortescue Metals Group Limited (Fortescue) for a pilot program to eliminate disrespectful behaviour in the workplace, including sexual harassment, bullying, and racism. This pilot program is in addition to Rio’s own efforts since the external report was released, which include training 91% of more than 7,000 leaders in the foundations of building psychological safety, exceeding the 80% internal target, and increasing gender diversity by 1.4% to 22.9%. Nonetheless, DBRS Morningstar considered this Corporate Governance factor from DBRS Morningstar’s environmental, social, and governance (ESG) criteria to continue to be relevant and it has been factored into the rating.

DBRS Morningstar notes that a negative rating action is unlikely but could occur if benchmark 62% Fe iron ore prices decline to the $50 to $55 per tonne range for at least a year, or about a 50% decline from current forecast levels. Even with the Company’s credit metrics in the AA category, a material improvement in Rio’s business risk profile would be required before a positive rating action could occur.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Governance (G) Factors
Rio continues to face governance challenges but has entered into a partnership with BHP and Fortescue for a pilot program to eliminate disrespectful behaviour in the workplace, including sexual harassment, bullying, and racism. Nonetheless, DBRS Morningstar considered the Corporate Governance ESG factor to be relevant and factored it into the rating.

There were no Environmental or Social factor(s) that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929 (May 17, 2022).

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the rating is Global Methodology for Rating Companies in the Mining Industry (August 30, 2022; https://www.dbrsmorningstar.com/research/402159).

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

This rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is an unsolicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at [email protected].

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at [email protected].

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