Management at Rio Tinto has agreed to form a joint venture with Codelco to develop the Salar de Maricunga lithium project in Chile, acquiring a 49.99% stake. Rio will make up to -US$0.9bn in phased investment through to 2030.

Citi sees the move as aligned with Rio's strategy to expand its exposure to lithium, a future-facing commodity. There are no expected changes the company's current -US$10-11bn annual capex budget, as the outlay fits within its circa -US$3bn growth allocation.

The broker values lithium exposure at around 5% of the company's attributable enterprise value and suggests project scope and capital intensity may shift as Rio joins the development.

Equal-weight. Target price $119.50.

Sector: Materials.

Target price is $119.50.Current Price is $120.00. Difference: ($0.50) - (brackets indicate current price is over target). If RIO meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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