RBC Capital downgrades Rio Tinto to 'underperform''

"Cost inflation and growing potential for M&A are added challenges which will complicate the investment case for this recent perennial winner," RBC said.

The bank said that while it expects the metals and mining sector to weaken in the coming months, most of its diversified coverage appears to be pricing in a fundamentally reasonable level.

"Rio Tinto is an outlier based on this analysis. We understand the rationale for the market crediting Rio Tinto's management following the improvements to the company's position over the past three years. However, in this more challenging environment, Rio Tinto's cash flows are more dependent on Chinese demand than peers; something we expect will weigh, especially as the iron ore price weakens.

RBC said that added cost pressures in aluminium and iron ore mean it expects a disappointing half-year result.

"We do not think that Rio Tinto will be able to protect its premium multiple on a relative basis over the coming 12 months and prefer other exposures in the space," it said.

At 1245 BST, the shares were down 2.8% to 4,137p.