I really think some FTSE 100 shares have failed to keep up with their true valuation in 2025. Rio Tinto‘s (LSE: RIO) one of them.
Mining can be cyclical, and the Rio Tinto share price had been sliding until it started to pick up this summer. And we’re still looking at a five-year fall of 9.5%.
Metals demand
It comes at a time when metals are in rising demand — and are becoming part of growing trade wars. Disputes affect rare earth metals, and plain old copper and aluminium in high demand for electrification.
In the third quarter of 2025, Rio produced 204,000 tonnes of copper — 10% more than the same quarter last year. And its price is 25% higher now than a year ago.
Rio also unearths a range of aluminium products, led by bauxite ore. Rio Tinto produced 16.4 million tonnes of it in a single quarter — with around 60 million tonnes expected for the full year.
And then we come to lithium. In the quarter, Rio’s output of lithium carbonate equivalent came to 13,000 tonnes. That might not sound as impressive as copper and aluminium, but batteries require a lot less tonnage than power grids do of their respective metals.
Good value?
The key question is whether Rio Tinto shares are good value on a forward price-to-earnings (P/E) ratio of 12. And that’s about the highest it’s been in the past few years, with earnings per share a bit erratic. It’s still below the FTSE 100 average, though that’s fairly common for a cyclical industry.
Some might say it’s about fair value. But I reckon a P/E falling under 11 on 2026 forecasts looks attractive — especially if we’re seeing signs of better global economic times. And the forecast 2025 dividend yield of 5.3% could rise to over 6% if forecasts prove accurate.
Analysts have an average target price on Rio of around 5,680p, which is a modest 5.5% ahead of the price at the time of writing. So that might not seem too convincing.
But for me, Rio Tinto’s all about long-term cash flow and dividend prospects. And I think it looks good on that score.
Care needed
There are clear risks associated with a mining stock like this. Commodity prices can falter, and we need to be especially aware of that when prices have been rising. Perhaps the biggest unknown is demand from China, which can be volatile on a year-by-year basis.
Then there’s the danger of an artificial intelligence bubble bursting. AI, especially the massive data centres it needs, is a big driver of all kinds of electrical demand these days.
And we musn’t forget that US import tariffs continue to hamper Rio’s exports from its key sites in Australia. But all told, I can only see demand for Rio’s key products growing in the long term. I think investors could do well to consider it today.
