In 2024, Rio Tinto Ltd (ASX: RIO) has gone big with lithium.
It has announced the proposed acquisition of Arcadium Lithium (ASX: LTM), as well as approved some major lithium projects.
But should you buy Rio Tinto shares for its lithium exposure? Let's see what one leading broker is saying.
The team at Ord Minnett note that the mining giant recently held an investor day which laid out its growth plans. It said:
Rio Tinto recently hosted an investor day where the company provided some mixed guidance on CY25 production volumes, with its copper target – around 10% below market expectations – proving the key talking point. The diversified miner also laid out its growth options into the early 2030s and highlighted its commitment to expanding its lithium exposure.
The broker highlights that, unlike BHP Group Ltd (ASX: BHP) which isn't interested in lithium, Rio Tinto is very positive about lithium and is betting big on the battery making material having a bright future. It adds:
The company, which agreed in October to take over lithium miner Arcadium Lithium for $US7 billion ($10 billion), reaffirmed its faith in the long-term outlook for the battery metal, arguing the market would quintuple in size by the mid-2030s.
This may bode well for Rio Tinto and its shares given that the broker expects the company to become the third largest lithium miner in the future. Ord Minnett explains:
Combined with its own developments – Jadar in Serbia and Rincon in Argentina (which has just received final investment approval) – the Arcadium acquisition would position Rio Tinto as the world's No.3 lithium miner, behind only US-based Abermarle and Chile's SQM, and lift its annual total production of lithium carbonate equivalent (LCE) to more than 450,000tonnes from circa 75,000 tonnes currently.
In light of the above, the broker believes that investors should be buying Rio Tinto's shares now.
According to the note, the broker has put a buy rating and $131.00 price target on them. Based on its current share price of $117.40, this implies potential upside of 11.6% for investors over the next 12 months.
In addition, a dividend yield of 5%+ is expected in FY 2025. This stretches the total potential return to over 16%.
All in all, this could make Rio Tinto shares a good option for investors that are looking for exposure to either the mining sector or lithium in 2025.
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