Rio Tinto (RIO.L): Q3 production: cost pressures & $2bn of capital release confirmed. Hold

RIO reported Q3 production last night UK time. Overall, the company delivered a slightly weaker than expected set of numbers, with strong OT production and continued progress at Simandou offset by weaker production from Kennecott, Escondida and lithium. Pilbara iron ore shipments were slightly ahead. FY26 production guidance remains unchanged across all divisions, although lithium production is now expected towards the lower end of the guidance range. Iron ore unit cost guidance has effectively been increased from $23.5-25/t to $25.5-27.5/t due to a stronger A$ and high diesel prices. Key projects are on track, with OT achieving annualised copper production of ~450kt in Q3, while Simandou achieved a ~10mt annualised production run-rate during the quarter. On the company's capital release plan (target of $5-10bn), RIO has agreed a number of smaller deals that total more than $2bn. The shares have lagged this year and are trading on an undemanding 2027 EV/EBITDA of ~5.7x and FCFy of 6%.