Jefferies has downgraded Rio Tinto (RIO) from “buy” to “hold” following the recent announcement that CEO Jakob Stausholm will step down later this year, a move that injects fresh uncertainty into the mining giant’s strategic direction and operational focus.
The downgrade comes as Rio Tinto’s shares underperformed peers, eking out only minor gains while the broader mining sector rallied on hopes of a commodity price revival.
The leadership shakeup follows mounting internal concerns over rising costs and a perceived reluctance by Stausholm to prioritize operational efficiency. While Stausholm’s tenure saw Rio Tinto expand aggressively into lithium, copper, and iron ore, sources indicate that the board grew increasingly frustrated with cost escalations and delayed action on expense controls.
The decision to part ways was not linked to any scandal but rather to conflicting priorities between the CEO and the board, particularly regarding cost management and capital discipline.
Jefferies cited the CEO transition as a key risk, noting that the uncertainty around Rio Tinto’s next leader could impact the company’s ability to execute on its growth agenda and manage capital-intensive projects. The brokerage also expressed concerns about the company’s recent multi-billion-dollar investments in lithium, such as the Arcadium acquisition, warning that these moves could deliver low returns if market conditions do not improve.
Additionally, Jefferies expects iron ore prices to drift lower in the near term due to ongoing U.S.-China trade tensions and persistent weakness in the Chinese property sector.
Despite these challenges, Rio Tinto’s board has reaffirmed its commitment to the company’s current strategy, emphasizing continued growth in critical minerals and decarbonization initiatives.
Internal candidates for the CEO role—such as Simon Trott, Bold Baatar, and Jerome Pécresse—are being considered, with a focus on operational excellence and cost control as top priorities for the next phase.
With RIO stock down 5.3% year-to-date and facing heightened scrutiny from both investors and analysts, the outcome of the CEO succession process will be closely watched as a bellwether for the company’s future performance and shareholder value.
