Why has the Rio Tinto share price dropped today?

Posted: 22 December 2021 12:09 pm
News
RioTinto-22Dec_1800x1000_Finder

Shares in mining giant Rio Tinto are down more than 15% in the last 6 months continuing to fall in Wednesday's trading.

Shares in mining giant Rio Tinto (ASX: RIO) are among the most traded stocks on the ASX on Wednesday but the stock was the only one among the big miners that is trading deep in the red.

At the time of writing, RIO shares were down 1.5% at $99.92.

What is weighing on the RIO stock price?

The Anglo Australian miner announced overnight it would buy the undeveloped Rincon lithium brine project in Argentina from private equity owners for US$825 million (AUD$1.15 billion).

The project sits in the middle of South America’s so-called "lithium triangle" that hosts several operating and emerging lithium projects.

Rio Tinto said it will update Rincon’s feasibility studies and mineral resource estimates to comply with Australian reporting standards before releasing further details of its plans for the project.

According to an early-stage feasibility study published by Rincon’s private equity owners, the project would require a total outlay of over US$1.5 billion (AUD$2.1 billion) for a 50,000-tonnes a year lithium carbonate production operation.

Rio Tinto is already looking to develop the US$2.4 billion lithium mine in Serbia, which has attracted protests by environmentalists who say it will pollute land and water. The new investment indicates its seriousness about a push into the global lithium market.

Capital intensive

The move comes at a time when lithium is in strong demand globally as a key material used in batteries for electric cars, but also amid increasing pressure on the top miners to cut their exposure to fossil fuels and highly polluting commodities as part of reducing their carbon emissions.

Investors have been somewhat nervous about miners like Rio Tinto pushing ahead into a phase of capital intensive greenfield development in battery minerals at a time when their cash cow iron ore business has seen prices retreat in recent months.

Rio Tinto’s chief executive Jakob Stausholm shrugged off such concerns, saying his company would continue to pump growth capital into commodities that supported decarbonisation of global energy networks.

“The Rincon project holds the potential to deliver a significant new supply of battery-grade lithium carbonate, to capture the opportunity offered by the rising demand driven by the global energy transition,” he said in a statement to the ASX.

Rio Tinto said a pilot plant has already been commissioned to test a novel technology that would extract lithium directly from the brine, with results expected by the end of the year.

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 RIO shares?

If you are keen to buy shares in Rio Tinto, 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