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Win-or-bust month for Rio Tinto shares

View of a gold mine from above
Image source: Getty Images.

The turmoil of the Chinese economy has been felt hard in certain sectors more than others. One such company affected by this is the iron mining giant Rio Tinto (LSE: RIO), whose shares have fallen over 23% since August 2021, and have lost almost all their gains since the end of last year.

Another reason for this decline is the allegation against the company for spreading misleading information to its investors regarding the rising costs in the Mongolian copper project. If there is something that millennial investors panic about more than crypto and NFTs, it’s fake news and information.

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Can you smell what Rio is cooking?

Rio Tinto is due to give an update on its operational costs in the second week of October, and a positive report will allow the share price to develop a support at the current levels – otherwise we could experience another 10 to 15% fall, like the drop with Glencore (one of its close competitors that was charged with the same ‘misleading’ allegations).

Caterpillar (a leading manufacturer of construction and mining equipment) has signed a Memorandum Of Understanding with Rio Tinto for developing zero-emissions autonomous haul trucks for mining operations in the Western Australia. This autonomous upgrade will increase the efficiency of the mining operations and reduce the carbon footprint of the operations, which will be beneficial for the environment.

Do Rio Tinto shares look attractive for the long term?

Recent dip in the share price could be a blessing in disguise, as I could get a good entry at these low prices. The long-term prospects of the company are tremendous as not only it is one of the world’s leading iron mining companies, but it also processes other minerals that are crucial for the infrastructural development. The latest talks between the CEO of Rio and the U.S. government on developing strategies to harness the critical minerals from the copper waste that is produced at the mining plant in Utah (state of US) are underway, and aimed at breaking the monopoly of China in this area.

The current market cap of £78 billion with a 53.84% debt to assets and the beta value of less than one – which shows that the volatility of the stock is less than that of the overall market – are indeed some attractive numbers to look at, considering it’s been operational since 1873. The company has also been consistent in providing dividends over the years to its investors.

As the world economies recover from the 2020 pandemic, the construction/infrastructure sector is predicted to see a tremendous growth. It would be interesting to monitor the fluctuations in Rio Tinto shares during the short-term events as mentioned above, keeping a long-term mindset.

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Vincent Abraham has no position in any of the companies mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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