Rio Tinto’s share price rally that started back in October has continued into the New Year. This marks a turnaround for a stock that slumped over the summer as commodity prices fell and a drop in demand from China. Longer-term, Rio Tinto is looking to reduce emissions and expand copper production.
Rio Tinto’s [RIO.L] share price has had a strong start to 2023.
Despite JPMorgan downgrading the stock to ‘underweight’ from ‘neutral’ in December, this hasn’t had much effect on Rio Tinto’s share price, which was up 2.45% this year at Thursday’s close. This continues a rally that began in October last year. Rio Tinto’s share price has surged over 32.41% since 28 October, closing Thursday 5 January at 5,940p.
The JPMorgan analysts did also say they were expecting “strong tailwinds” from the miner in the first quarter of 2023.
One person cashing in on the recent upswing in the stock is Rio Tinto’s chief commercial officer Alfredo Barrios who sold 25,000 shares at 5,850p, worth £1.5 million, on Thursday 29 December.
The turnaround in Rio Tinto’s share price was no doubt welcomed by its shareholders after the stock slumped in the summer of 2022 due to falling commodity prices and a slowdown in China’s economy. In October, Rio Tinto trimmed its full year production guidance across several commodities as weakening demand was felt in the third quarter.
Tailwinds for the miner include the reopening of China's economy, with the country being one of the miner’s biggest iron ore customers.
Rio Tinto looks to cut emissions
Efforts to reduce carbon emissions are not the first thing to come to mind with Rio Tinto. Yet, the Anglo-Australian mining giant hopes to halve emissions by 2030 from 2018 levels and achieve net-zero emissions by 2050.
As part of this, Rio Tinto has signed a memorandum of understanding with Japanese trading house Mitsui & Co [8031.T] to explore ways to reduce carbon emissions. Under the memorandum, the pair will look into decarbonising steel making and developing new renewable energy sources.
One key area is steel and iron production, with end users, such as car manufacturers, facing stiff pressure from governments and consumers to decarbonise. Mitsui says that it will help the miner’s decarbonisation efforts with technology from companies that it holds stakes in, as well as providing alternative fuel sources such as ammonia, methanol and hydrogen.
M&A activity continues
Last year, Rio Tinto delivered record profits last year thanks to heightened commodity prices. However, longer-term it plans to shift to metals that will help shape future technologies. One such metal is copper, which is used in the manufacturing of electric vehicles.
In December, it was announced that Nuton, a Rio Tinto cleantech venture, had taken a 16.5% stake in Regulus Resources [RGLSF] for $15m. Nuton has developed technology that can process arsenic-bearing copper and will use this to process samples from Regulus’ copper project in northern Peru.
December also saw Rio Tinto close its $3.3bn deal to buy up the shares of Canadian miner Turquoise Hill. The deal gives Rio more control of the Oyu Tolgoi copper mine in Mongolia. The mine is crucial for Rio Tinto’s metal expansion strategy as it will become the biggest copper mine when it reaches full production of around 500,000 tonnes per year by 2030.
Yet, the miner has maintained it is taking a disciplined approach to its acquisitions. At an investors' day last month, Rio Tinto’s chief financial officer Pete Cunningham said “On M&A… we’ve got very, very strong discipline on what we do. At the end of the day, it’s got to be a fit with strategy. We’ve got to be the best operator of anything we buy and the value has to be there.”
As it stands, the 21 analysts polled by Refiniv have a 5,719.06p median price target on Rio Tinto’s stock. Hitting this would see a 3.7% downside on Thursday’s close.
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