Rio Tinto’s share price slumps following production update! Time to buy in?

Poor production news has pulled Rio Tinto’s share price sharply lower again. Is the FTSE 100 mining stock now too cheap to ignore?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Mining for raw materials is extremely complex and operational problems are common. This has been the case with Rio Tinto (LSE:RIO) more recently, and its share price has sunk on disappointing production news for the last quarter.

At £49.98 per share, the FTSE 100 miner was last dealing 3.7% lower on Tuesday (16 July).

Created with Highcharts 11.4.3Rio Tinto Group PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Should you invest £1,000 in Vistry right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Vistry made the list?

See the 6 stocks

This latest fall means Rio Tinto shares have fallen more than 10% in just six weeks. As a long-term investor, I think this could represent an attractive dip-buying opportunity. Here’s why.

Triple trouble

In today’s quarterly update, Rio Tinto delivered a triple whammy to investors. Firstly, the world’s biggest iron ore miner said that production of the ferrous metal dropped 2% in the second quarter, to 79.5m tonnes.

For the first half, output was down by the same percentage, at 157.4m tonnes.

Production missed City forecasts because of a train collision at Rio’s Pilbara operations in Australia. The incident in mid-May resulted in “around six days of lost rail capacity and full stockpiles at some mines“, the company said.

On top of this, Rio said that total copper production for 2023 would likely be at the lower end of its 660,000 to 720,000 tonnes guidance. This reflects conveyor belt problems at its Kennecott mine in the US and changes to its mine plan.

Finally, Rio warned that alumina output for this year would be 7m to 7.3m tonnes, down from a previous forecast of 7.6m to 7.9m tonnes. This is due to gas supply problems at its Gladstone asset Down Under.

Staying bullish

I own Rio Tinto shares myself, and so today’s news is disappointing to me personally. However, I knew that such risks are part and parcel of owning mining stocks.

My opinion was that the potential benefits of owning the Footsie company offset these dangers. And it’s a view I continue to hold despite its recent troubles.

This is because Rio Tinto has an exceptional chance to grow profits over the next decade. Factors like the rapid expansion of renewable energy, increasing sales of electric vehicles (EVs), booming AI adoption, and ongoing urbanisation will all drive demand for base metals and iron ore sharply higher.

Mega miners like this have the scale to make the most of this opportunity, too, through new projects and expansions to existing assets.

Indeed, in brighter news on Tuesday, Rio Tinto also said it had received all approvals to build the Simandou iron ore project in Guinea. First production from the asset — which the company says contains a mammoth 2bn tonnes of the steelmaking ingredient — is expected in 2025.

Too cheap to ignore

It’s also my opinion that the risks of owning mining shares are baked into these companies’ often-low valuations.

Following today’s share price decline, Rio Tinto now trades on a forward price-to-earnings (P/E) ratio of just 8.6 times.

All things considered, I think the FTSE firm is a great stock for long-term investors to consider.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has positions in Rio Tinto Group. 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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Glencore’s share price is 53% off its 52-week highs. Is it time to consider buying?

Glencore’s share price has tanked due to concerns over an economic slowdown. Is this an amazing buying opportunity for long-term…

Read more »

Investing Articles

Forecast: in 1 year, the Marks and Spencer share price could be…

The Marks and Spencer share price has hit its highest point since 2016 after more than doubling under the new…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Down 34%, does IAG’s share price look an unmissable bargain to me now?

IAG’s share price had fallen a long way even before the latest market rout, but this may mean a bargain-basement…

Read more »

Investing Articles

Forecast: in 1 year, the HSBC share price could be…

The HSBC share price is approaching a 20-year high under its new CEO as he targets $1.5bn of savings. Here…

Read more »

Investing Articles

Forecast: in 1 year, the Barclays share price could be…

Barclays’ share price has more than tripled in the last five years as higher interest rates push up margins. But…

Read more »

Investing Articles

This FTSE 100 heavyweight’s yield is forecast to rise to 8% by 2027 and it looks 60%+ undervalued to me too!

This FTSE financial gem looks very undervalued to me and its yield is projected to rise to well over my…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

An all-time low! Have 25% car tariffs wrecked the Aston Martin share price?

The Aston Martin share price is diving into uncharted territory after Trump levied 25% duties on all cars and auto…

Read more »

Investing Articles

Forecast: in 1 year, the Tesco share price could be…

Competitive fears are driving the Tesco share price down, but has the market overreacted? Here are the latest analyst forecasts…

Read more »