Morningstar DBRS Confirms Rio Tinto Plc & Rio Tinto Ltd.'s Issuer Rating at "A" With a Stable Trend

DBRS Limited (Morningstar DBRS) confirmed Rio Tinto Plc & Rio Tinto Ltd.'s (Rio or the Company) Issuer Rating at "A" with a Stable trend.

KEY CREDIT RATING CONSIDERATIONS
The credit rating 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 expectation 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 2024, the Company had approximately $14.9 billion in adjusted cash, cash equivalents, current liquid investments, and undrawn credit facilities, which provides a significant cushion to counter the broader impact of ongoing trade and geopolitical tensions that have negatively affected global growth.

CREDIT RATING DRIVERS
Morningstar DBRS notes that it could take a negative credit rating action if benchmark 62% Fe iron ore prices were to decline to the $55 per tonne to $65 per tonne range for at least a year, or about a 40% decline from current forecast levels, all else being equal. Even with the Company's credit metrics in the upper end of the "A" category, a material improvement in Rio's business risk profile, such as a credit-accretive acquisition, would be required before Morningstar DBRS could take a positive credit rating action.

EARNINGS OUTLOOK
Based on using the mid-range of management guidance for volumes and unit costs and Bloomberg consensus commodity price forecasts as of March 10, 2025, Morningstar DBRS expects 2025 revenues to be in the $56.5 billion range, or higher compared with $53.7 billion in 2024, while Morningstar DBRS-adjusted EBITDA is also expected to increase to approximately $20.9 billion compared with $19.0 billion in 2024.

FINANCIAL OUTLOOK
Rio is expected to deliver adjusted operating cash flow of $15.3 billion this year, a decrease from $16.0 billion in 2024, while capital expenditures are expected to be $10.8 billion, which is in line with management guidance. However, Morningstar DBRS expects all of the Company's financial metrics to weaken in 2025 as a result of the long-term debt issued following Rio's completed acquisition of Arcadium Lithium, although financial metrics remain supportive of the credit rating. That said, ongoing trade and geopolitical tensions, and relatively restrictive monetary policies put in place by central banks around the world, pose challenges for the global economy.

CREDIT RATING RATIONALE
Rio's business risk profile is assessed between the "A" and lower end of the "A" category based on the Company's robust reserves, low operating cost structure, and position as an industry leader where it is an established global diversified mining producer.

In 2024, the lower Morningstar DBRS-adjusted debt was partially offset by lower Morningstar DBRS-adjusted cash flow, which led adjusted debt-to-capital metrics to improve and move into the AA (low) category. The cash flow-to-debt, adjusted debt-to-EBITDA, and EBITDA-to-interest metrics remained in the AA, AA (low), and A (low) categories, respectively.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Governance (G) Factors
The following governance factor had a relevant effect on the credit analysis: Rio continues to face governance challenges related to disrespectful behavior in the workplace, including sexual harassment, bullying, and racism. In response, the Company initiated its Everyday Respect program that is focused on changing culture and behaviors. In a Progress Review report that was announced in November 2024, improvements are under way, but people continue to experience harmful behaviors in Rio's workplaces. As a result, Morningstar DBRS considered the Corporate/Transaction Governance ESG factor to be relevant and factored it into the credit rating.

There were no Environmental or Social factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of BRA Factors 
In the analysis of Rio, the relative weighting of the BRA factors was approximately equal. 

(B) Weighting of FRA Factors 
In the analysis of Rio, the relative weighting of the FRA factors was approximately equal. 

(C) Weighting of the BRA and the FRA 
In the analysis of Rio, the BRA carries greater weight than the FRA. 
 
Notes:
All figures are in U.S. dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Companies in the Mining and Forest Products Industries (November 14, 2024), https://dbrs.morningstar.com/research/442961

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781
-- Morningstar DBRS Global Corporate Criteria (February 3, 2025) https://dbrs.morningstar.com/research/447186

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

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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 info-DBRS@morningstar.com.

The credit rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the credit rating process for this credit rating action.

Morningstar DBRS did not have access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit 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. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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