Rio Tinto's Copper-Led Rally Sparks a Valuation Debate After 65% Gain

Fund managers say a copper-driven re-rating and brief Glencore merger talks have left the stock's valuation increasingly contested

6 Jul 2026 · 5 min read

Diversified miner Rio Tinto rose more than 65 per cent over 12 months as copper and aluminium prices surged, briefly entertaining a merger with Glencore before walking away, as fund managers increasingly debate whether its valuation has run ahead of the underlying growth story.

A commodity tailwind builds through late 2025

Ten Cap's September 2025 update pointed to elevated iron ore prices and the shutdown of the Grasberg mine lifting copper prices as materially improving earnings, complemented by a strategic shift toward core commodities and streamlined operations. Sage Capital's January 2026 update reported shares up 20 per cent for the quarter as iron ore held above US$100 a tonne and copper prices shot up beyond US$5.5 a pound, with iron ore proving resilient throughout the period despite broader macro uncertainty.

Brief merger talks with Glencore, then a walk-away

Pendal Group's January 2026 update confirmed Rio Tinto and Glencore were in merger discussions, though no structure or terms had been disclosed, with Rio given until February 5 to confirm its intentions. Perennial Partners noted the stock lagged briefly on the M&A uncertainty, while remaining overweight the bulk miners given undemanding valuations and strong balance sheets. Pendal's February update reported the outcome: Rio Tinto announced it would not pursue the merger after a month of talks, citing an inability to reach an agreement that would deliver value to shareholders, with no further rationale given.

Rio Tinto (RIO, +3.7%) announced it would not pursue a merger with Glencore after a month of talks. A rationale was not given other than that an agreement could not be reached that would deliver value to shareholders.

— Pendal Group, Newsletter, February 2026

An asset sale program and a lithium growth pathway

Wilson Asset Management's December 2025 update reported Rio Tinto's capital markets day plans to release between US$5 billion and $10 billion from asset sales, including its borates and titanium businesses, to reduce debt and fund growth elsewhere. A separate December site visit to Argentina detailed the company's lithium growth strategy, with management reiterating a pathway to 200,000 tonnes per annum of installed lithium carbonate capacity across its Argentinian and Chilean portfolios.

A copper-led re-rating gathers pace

Perennial Partners' February 2026 update reported a strong result highlighting cash generation from Rio Tinto's mature, low-cost iron ore operations, which management increasingly framed as funding growth in copper, described as the key driver going forward. Hyperion Asset Management's May 2026 update explicitly tied its new position to conviction that the physical infrastructure underpinning the AI economy required substantially more copper, with both Rio Tinto and BHP highlighting significant growth in that segment. Blackwattle Investment Partners' own May update reported Rio Tinto participating in a sharp copper price rally alongside BHP, supported by a structural global supply deficit.

Holdings in Rio Tinto (+10.9%) benefiting from the surging copper price, while the iron ore price continues to hold at over US$100/t. The market now views the iron ore businesses as very profitable cash cows, which will fund the growth in copper production going forward.

— Perennial Partners, Monthly Report, May 2026

A valuation gap opens as the rally matures

By July 2026, opinion had clearly diverged. Alphinity Investment Management rated the stock a hold, having trimmed its position but remaining constructive on the underlying commodity mix of iron ore, copper, aluminium and lithium, while noting a new CEO was in place. Maple-Brown Abbott went further, rating the stock a sell despite still holding it, pointing out Rio Tinto had traded on a single-digit price to earnings ratio of eight or nine times just 12 months earlier, and now traded at 15 to 16 times depending on the commodity price assumptions used, a substantial re-rating Maple-Brown Abbott saw as reducing the remaining margin of safety.

We still own it, but yes, we're selling it. Rio 12 months ago was on a single digit PE of eight or nine times. Again, depending on your commodity price deck, it's on 15 or 16 times. So, it's enjoyed a substantial rerating.

— Maple-Brown Abbott, Article, July 2026

Profit-taking after a 65% annual gain

Perennial Partners' June 2026 update confirmed it had been trimming resources holdings broadly given the strength of the sector, including reducing Rio Tinto after a gain of more than 65 per cent over the trailing 12 months, even while still valuing its large copper exposure. Alliance Bernstein maintained an overweight position through a June pullback as commodity prices retraced from their highs, continuing to believe Rio Tinto remained well positioned over the longer term despite the near-term volatility.