Why has the Rio Tinto (RIO) share price dropped today?

Posted: 24 February 2022 12:16 pm
News
RIO-shares-24Feb_1800x1000_Finder

Shares in the iron ore miner are down 8.55% over the last 12 months continuing their sell-off today.

Shares in iron ore miner Rio Tinto (ASX: RIO) are high on the list of losing shares on the ASX on Thursday. At the time of writing, the stock was down 2.8% to $116.51.

Sentiment for mining stocks remains weak, with Fortescue Metals Group (ASX: FMG) also down around 2%, while larger rival BHP (ASX: BHP) slid 6%, although that was largely on account of that stock turning ex-dividend today.

What is weighing on the RIO stock price?

The decline comes despite Rio late on Wednesday reporting its highest ever annual profit, which more than doubled to US$21.09 billion ($29 billion) for 2021. But the period covers a golden first half when iron ore prices remained well over US$200 a tonne, before collapsing in the second half.

"The recovery of the global economy, driven by industrial production, resulted in significant price strength for our major commodities, which we were able to capture, achieving record financial results," Rio Tinto Chief Executive Jakob Stausholm said.

It enabled Rio to declare a shareholder windfall totalling US$10.40 a share for the year, including a final dividend of US$4.17 a share, and another US$0.62 a share special dividend.

Still, the company's full year underlying earnings of US$21.4 billion were slightly behind analyst expectations. The miner also revealed substantial cost increases at its flagship Western Australia iron ore operations, hit by a combination of closed borders and rising fuel prices.

Cost pressure

Australian miners have been hit particularly hard by labour shortages induced by COVID-19 restrictions. Miners have benefited from Western Australia's isolationist policies allowing them to operate uninterrupted over the duration of the pandemic, but continued border closures are now resulting in companies struggling to access skilled workers.

Earlier this month, Fortescue Metals posted a 32% slide in first-half profit, hurt by higher material and labour costs, while BHP also flagged the impact of COVID-19 restrictions and significant adverse weather events in Western Australia.

Rio itself has previously forecast weaker-than-expected iron ore shipments for 2022. On Wednesday, the miner warned of Pilbara iron ore unit cash costs for 2022 rising. Rio's costs averaged US$18.60 a tonne in 2021, but the company is forecasting average costs of US$19.50-US$21 a tonne in 2022.

The cost increase is partly due to delays in commissioning replacement mines, while rising diesel costs are also playing a role in the higher operational cost profile.

Mr Stausholm said he hoped the reopening of Western Australia's borders from 3 March would gradually relieve the pressures.

Serious about investing? Here's your new unfair advantage

Ticker Nerd uses advanced software to track hundreds of signals and data points to find stocks before they blow up. Don't miss out!
Get started for free

Considering buying mining shares?

If you are keen to buy shares in BHP, Rio Tinto or Fortescue Metals, you can invest through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

Get more from Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site