Rio Tinto’s copper and lithium drive 28% EBITDA growth in H1 2026

Copper and Lithium Power Earnings Surge

Rio Tinto (ASX:RIO) posted a striking 28% rise in underlying EBITDA to $14.8 billion for the first half of 2026, with copper and lithium operations leading the charge. Copper’s underlying EBITDA soared 84% to $5.7 billion, buoyed by a 31% increase in output from the Oyu Tolgoi mine in Mongolia, which continues its ramp-up toward a 500,000 tonnes per annum target by 2028. Lithium volumes jumped 53% to 27.3 kilotonnes of lithium carbonate equivalent (LCE), supported by early production ahead of schedule at the Fénix 1B and Sal de Vida projects in Argentina.

This growth in copper and lithium offset a slight dip in iron ore earnings, which were broadly flat year-on-year at $6.8 billion despite Pilbara’s highest first-half production since 2018. Aluminium and lithium combined contributed 38% more EBITDA, reaching $3.3 billion, helped by a 39% rise in realised aluminium prices and the commissioning of the low-carbon AP60 smelter in Quebec.

Productivity Gains and Capital Discipline

Rio Tinto’s operational excellence shone through its productivity program, which banked $870 million in benefits during H1 and is on track to hit a $1.8 billion annualised run rate by year-end. Initiatives such as accelerated underground development at Oyu Tolgoi, improved system availability in Pilbara iron ore, and contractor management in aluminium smelters contributed to both volume uplift and cost efficiencies.

Capital investment remained disciplined at $5 billion, up 12% year-on-year, focusing on sustaining and growth projects. Notable developments include progress on Pilbara’s replacement mines with first ore expected in 2027, ongoing construction at Simandou in Guinea with key infrastructure more than three quarters complete, and lithium expansions in Argentina and Canada. The company maintained its 2026 production guidance across key commodities and reiterated unit cost guidance despite inflationary pressures and higher energy costs.

Cash Flow Strength and Shareholder Returns

Strong cash flow generation underpinned Rio Tinto’s financial resilience, with net cash from operating activities rising 32% to $9.2 billion and free cash flow surging 75% to $3.8 billion. The company declared a $3.4 billion interim dividend, a 43% increase, maintaining a 50% payout ratio consistent with its long-term policy. The dividend will be fully franked and payable on 24 September 2026, with a Dividend Reinvestment Plan option available.

The balance sheet remains solid, with net debt slightly reduced to $14.1 billion and net gearing at 16%. The company’s strong credit ratings and liquidity position support its ongoing investment and shareholder return ambitions.

Sustainability and Operational Challenges

Rio Tinto continues to advance its decarbonisation goals, targeting a 50% reduction in Scope 1 and 2 emissions by 2030 against a 2018 baseline. The company is trialling battery-electric haul trucks at Oyu Tolgoi and Pilbara and progressing renewable energy projects, including a 75MW solar farm in partnership with Yindjibarndi Energy Corporation in Australia. In aluminium, a landmark A$2 billion government funding package aims to secure the future of the Boyne Smelters in Queensland.

Safety remains a priority, although the company reported two tragic fatalities in the period. Rio Tinto is strengthening safety standards and compliance across its operations.

Outlook and Emerging Questions

While Rio Tinto’s first half performance confirms the strength of its diversified portfolio and operational improvements, the company faces ongoing challenges. The Mongolian tax authority’s assessment relating to Oyu Tolgoi’s 2021 and 2022 tax years remains disputed, injecting uncertainty over future cash flows. Inflationary pressures and energy costs continue to test cost management efforts, especially in iron ore and aluminium.

Looking ahead, investors will be watching how Rio Tinto navigates project execution at Simandou, the pace of lithium capacity expansions, and the finalisation of permitting and community agreements for growth options like Resolution and Winu. The company’s ability to sustain productivity gains and manage geopolitical and regulatory risks will be critical to maintaining its momentum beyond 2026.

Amid a tightening market for copper and lithium driven by electrification and green energy trends, Rio Tinto’s strategic focus on these commodities positions it well. Yet, the balance between capital discipline and growth investment will remain a delicate act as the company aims to deliver long-term value.

Rio Tinto’s 2026 interim dividend announcement, fully franked at 30%, reinforces its commitment to returning cash to shareholders while funding its ambitious growth pipeline.

Overall, Rio Tinto’s H1 2026 results illustrate a company capitalising on its world-class assets and operational improvements, but the path forward will test its agility amid evolving market and regulatory landscapes.