Rio Tinto Stock
Rio Tinto Group is a leading global mining and metals company. Although it refines some of its products, the company has a primary focus on extraction, producing iron ore, aluminium, copper, diamonds, titanium, gold, uranium, and borates. The company was founded in 1873, and it has dual headquarters in London, UK, as well as Melbourne, Australia.
With over 60 operations and projects in 36 countries, Rio Tinto is the second-largest metals and mining company in the world (just behind BHP) as of July 2021, and it prides itself as a pioneer in the field. The company has led the way in leveraging technology in the mining sector, implementing autonomous rails, drills, and trucks, as well as integrating original equipment manufacturer data and cloud-based real-time mining analytics. Mining and minerals companies have always faced negative PR due to their extreme activities on Earth’s deepest terrains, but Rio Tinto stands out as a socially responsible corporation that already stopped producing fossil fuels, including coal, in 2018.
Rio Tinto has managed to reach its enviable position following a rich history of strategic mergers and acquisitions. Its most recent and notable deal, however, was the 2007 acquisition of Alcan, a Canadian mining company, for $38.1 billion.
Rio Tinto is dual-listed on the London Stock Exchange and the Australian Securities Exchange. Additionally, Rio Tinto stock is also available for trading on the New York Stock Exchange as an ADR (American Depositary Receipt). The stock trades under the ticker symbol RIO on all those exchanges.
RIO Stock History
Since 2010, Rio Tinto has implemented one stock split – a 4-for-1 on the 30th of April 2010. Typically, stock splits are implemented when prices are high. But RIO stock was arguably split when prices were not enjoying the best of days. Nonetheless, stock splits usually result in higher volatility on the underlying shares.
RIO stock started the new millennium with a split-adjusted price of circa $20 and stagnated in that area until late 2003, when it picked up upward momentum. The drift higher saw the stock cross above $50 by early 2006, before taking a breather for the better part of that year. The stock started edging higher again in 2007, making a sharp rally that saw it printing its all-time high just above $138 in May 2008.
But 2008 would prove a tough year for RIO shares as prices succumbed to multiple pressures, including the Great Recession, falling commodity prices, a slowdown in China (a major market), as well as a cancelled merger with BHP Billiton (a major rival). The stock quickly plunged from its glory, printing a low below $10 by December 2008. A recovery then ensued as business fundamentals improved. The subsequent rally saw RIO stock break above $70 by December 2010, but it could not sustain above that price for long. A bearish multi-year followed, driving the stock to lows of circa $20 by January 2016. Since then, the stock has largely edged higher, breaking above $90 in 2021 and firmly settling above $80 as of July 2021.
Rio Tinto operates in a volatile industry, but the company has always been a willing dividend payer that has often adjusted its payouts according to its business performance.
How to Trade RIO Stock
Here are the factors to consider when trading RIO stock:
- Legislative and Taxation Issues
For a global mining giant like Rio Tinto with multiple projects in different countries around the world, legislative and taxation issues are a major source of dynamic business risks. The mining sector is always subject to constant regulatory scrutiny, with laws and taxes always changing. The varied concerns include environmental impact, labour issues, and complex taxes. Changes in these factors could have a significant impact on investor sentiment towards the RIO stock.
- Negative PR and Lawsuits
Rio Tinto is always mindful of its image, but the company operates in an industry vulnerable to periodic bad headlines. Rio Tinto has seen its stock suffer in the past when news, such as disagreements with governments, employee mistreatment, and demolition of human settlements have hit the wires. Modern investors have shown a tendency to reward socially responsible companies, and both positive and negative headlines are capable of influencing the price of Rio Tinto stock.
- Fluctuating Commodity Prices
Commodity prices are usually unpredictable in the global markets, and this makes it difficult to forecast Rio Tinto revenues. In recent years, commodity prices have particularly suffered, and this has predictably weakened revenues within the mining sectors. Mining projects are capital intensive, and low market prices significantly hurt the bottom-line of underlying companies.
- Periodic Earnings
Rio Tinto’s fiscal year runs from January to December, and the company releases periodic earnings reports to update shareholders on the performance of the business. For mining companies such as Rio Tinto, investors watch out for revenues, dividend payouts, debt levels, and free cash flow. Positive numbers will always provide tailwinds for the RIO stock, whereas negative figures could pressure the stock lower.
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