Rio Tinto CEO succession underscores undervaluation and puts focus on value unlock strategy
Last updated: 13:30 23 May 2025 BST, First published: 13:20 23 May 2025 BST
Jakob Stausholm will step down as Rio Tinto Ltd (LSE:RIO, ASX:RIO, OTC:RTNTF) chief executive at the end of 2025, a move that JPMorgan believes strengthens the case for unlocking value in the miner’s global portfolio and dual-listed structure.
The bank reiterated its 'overweight' rating on the stock and sees up to 30% upside, underpinned by a £59.20 base case valuation.
The announcement marks the start of a formal succession process, with internal candidates Bold Baatar, chief commercial officer, and Simon Trott, head of the iron ore division, viewed as the front-runners.
While market reaction has focused on timing, JPMorgan argues that the leadership change reinforces a broader strategic shift already underway.
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A key catalyst is the board’s response to shareholder pressure following the recent annual general meeting vote rejecting a proposal to review the group’s dual listing across the UK and Australia.
The vote has, however, increased expectations that the board will take steps to reduce the 19% discount at which Rio Tinto plc shares trade relative to their Australian counterparts.
JPMorgan sees the succession planning as a moment of inflexion. A new chief executive will be expected to deliver a strategy that maximises value across a portfolio of tier-one assets.
While the timeline for formal change may extend into 2026, the groundwork has been laid for action that could include portfolio restructuring, simplification of the dual listing and greater capital discipline.
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Operationally, Rio Tinto is on solid footing, with its iron ore operations in the Pilbara and copper assets in Mongolia and the United States viewed as strong contributors to future cash flow.
These assets provide the foundation for what the bank describes as a “self-help” approach to rerating the equity, particularly if management targets a reduction in the valuation discount through structural change.
JPMorgan’s sum-of-the-parts valuation of £58 to £61 per share implies material upside from current levels. Rio is the bank’s sole overweight among European, Middle Eastern and African diversified miners.
In the absence of external catalysts, the bank argues that shareholder returns and self-driven revaluation will be central to closing the discount. The leadership transition, in its view, is less a risk than an opportunity to reset and address longstanding concerns around the group’s structure and capital allocation.
Although formal succession is more than a year away, JPMorgan believes the process will anchor a broader campaign to highlight the disconnect between Rio Tinto’s underlying asset quality and its market valuation.
The message to the board is clear: shareholders expect more than steady hands; they want strategic boldness.
