Rio Tinto: Nowhere to go but up

However, Rio Tinto is currently experiencing a rough patch. The share price of Rio Tinto Limited or ASX: RIO has seen a lot of volatility for the past couple of months. Since June of this year, the share price dropped by 9%. They are still trying to recover from this dip and at the time of writing this article, their shares have increased by 3.5% – a small upswing compared to a significant decline. Over the last six months, the total depression is around 18%.

Since Rio Tinto is a mining company, their profit and revenue depend on the prices of the metals themselves. Over the last few months, the price of iron ore has been unstable. This is not good for Rio Tinto, especially when a lower resource price means less profit for them. Even if the company also deals in other kinds of metals, it is the iron ore industry that generates the highest profit.

The company is set to release a third-quarter production report on October 18, 2022. This will most likely show whether the share price is acting positively or negatively with respect to the current developments in the mining industry.

Are Rio Tinto’s shares worth investing in?

There are a lot of different aspects that one needs to take into account with respect to Rio Tinto’s shares. The company has been looking for ways to further expand the extraction of other metals like lithium. They have already established an initial drill program, around 500-1000m at North Rover that is set to launch in 2023.

“With every project in the world that’s projected to come on, we’ll still be short by 50% of the amount of lithium that’s required to build the electric vehicles,” RIO lithium boss Sinead Kaufman stated.

This is expected to propel the long-term growth of the corporation. Rio’s stellar balance sheet, their management & assets, and undervalued stock price are all looking good. In fact, they have one of the strongest balance sheets and management teams in the industry. Their prices are also relatively cheap compared to others in their range.

However, in terms of short-term prices (3-5 years), things are not as rosy. The price of Rio Tinto shares could potentially fall by another 7%.

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Recent Updates on Rio

In September 2021, Rio established the Communities and Social Performance (CSP) report in order to maintain transparency with the improvements that they are making on cultural heritage protection. On September 7, they released a second update on the CSP report.

The company made progress with respect to external obligations and recommendations along with pre-existing commitments and internal work plans. Some feedback was also shared by traditional owners. They were also able to make governance arrangements that will help them track the progress of the initiative. The company is also maintaining their focus on improving sector-wide cultural heritage management and they are also enhancing indigenous cultural connection and employment.

“In the two years since the tragic destruction of the rock shelters at Juukan Gorge, we have been changing the way we work in every part of our business. While we have made progress, we know it will take time to rebuild relationships and regain the trust of Traditional Owners and the wider community. We remain focused on improving our engagement, and together with the Indigenous peoples of the lands on which we operate, we are committed to ensuring cultural heritage is respected, valued and conserved for future generations,” Rio Tinto Chief Executive Jakob Stausholm said.

CSP also has new organizational structures, standards, and practices. They will also be in business with 500 CSP professionals working on over 60 operations in 41 countries across the globe. According to Stausholm, they are always listening to feedback and taking it into consideration to further improve their company’s practices.

Rio Tinto recently signed a Memorandum of Understanding with National Amusement Park LLC and the mayor’s office of Ulaanbataar City of Mongolia with the aim of restoring and improving 10 hectares of land in the National Amusement Park. They will be working on the western part of the park.

Rio has also partnered with Voltalia and Black Economic Empowerment and will be supplying renewable solar power energy to Richard’s Bay Minerals which will be used for their operations and explorations in KwaZuluNatal, South Africa. Construction will begin by 2023 and is expected to last a year. The project is expected to have a generation capacity of 300GWh and will reduce the emission of greenhouse gasses by a minimum of 10%.

This shift has appealed to mining companies from around the world since they are seeking renewable energy resources to reduce their environmental footprint.

Renewal of ERA board

Rio Tinto announced that they are introducing new perspectives to their company by requesting the resignation of Energy Resources of Australia’s (ERA) Chairman Peter Mansell. They remain optimistic that this will have a positive impact on their company.

“We thank Peter Mansell, Paul Dowd and Shane Charles for their contribution to ERA and wish them well for the future. We are committed to working with ERA to facilitate this board renewal process and urgently develop a workable plan to fund the increased rehabilitation costs. We restate our belief that the successful rehabilitation of the Ranger Project Area, which is of critical importance to the Mirarr People, Rio Tinto and ERA, can be achieved in a way that is consistent with the Mirarr People’s wishes. This remains our utmost priority and commitment,” Rio Tinto chief executive Kellie Parker said.

This change will address the material cost and schedule issues on the Ranger rehabilitation project in Australia’s Northern Territory.