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