Rio Tinto (RIO) reported mixed financials for the first half of 2023 early Wednesday, as the mining giant suffered from lower commodity prices and slowing global demand. On Wednesday, RIO stock angled lower Wednesday after mining stocks made bullish moves on China optimism.
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Rio Tinto reported profits sank 34% to $3.53 per share in the first half of the year. Meanwhile, revenue dropped more than 10% to $26.67 billion. Sales from iron ore decreased 11% to $15.6 billion while aluminum revenue sank 18% to $6.26 billion.
“We will continue paying attractive dividends and investing in the long-term strength of our business as we sustain and grow our portfolio, while contributing to society’s drive to net zero,” Rio Tinto Chief Executive Jakob Stausholm said in a statement.
Wall Street had forecast Rio Tinto earnings in the first half dropping 32% to $3.59 per share with revenue slipping 11% to $26.54 billion.
Rio Tinto said financials were impacted by “significant movements in commodity prices” in 2023. The company added this was predominantly due to China’s stunted economic recovery. Prices for iron ore and copper are down more than 20% from their 2022 peaks.
However, ahead of RIO’s first half financial report, optimism that China will ramp up stimulus, especially in the ailing property sector, pushed mining stocks, along with copper and other metal prices, higher.
China is the world’s top importer of iron ore, the leading producer of steel and coal, and the dominant construction market.
Copper and metals prices, which had risen solidly in recent days, dipped Wednesday.
RIO Stock
Rio Tinto stock fell 2.9% to 67.85 in early Wednesday market trade, moving slightly below an early entry. On Tuesday, Rio Tinto stock gained 4.2% to 69.83 in above-average volume, clearing short-term resistance and a trendline.
Mining Stocks Near Buy Points
Fellow base-metal giant BHP (BHP) declined 1.6% Wednesday. Shares rallied 4.3% to 64.16 Tuesday. Still some distance from the official 71.52 buy point, BHP stock also flashed an aggressive entry from its 200-day, short-term highs and a trendline.
Meanwhile, Freeport-McMoRan (FCX) dipped a fraction Wednesday. Shares popped 3.8% on Tuesday to 43.69, trading around possible early entries of 43.46 and 43.88. The copper giant and gold miner reported earnings last week.
Southern Copper (SCCO), with earnings expected soon, gained 1% early Wednesday. On Tuesday, SCCO stock moved above an official 82.05 buy point, jumping 5.3% to 83.60 Tuesday. Shares are now extended from the 50-day.
Collectively the 24 stocks in the IBD Mining-Metal Ore industry group have advanced nearly 16% in 2023, according to MarketSmith. The group has lost around 8% since hitting March 3 highs of 371.74.
Rio Tinto Earnings
The London-based Rio Tinto was founded in 1873 and is currently the world’s second-biggest miner by market value.
The company on Wednesday said it will miss 2025 decarbonization targets, unless it uses carbon offsets. Rio Tinto has targeted a 15% reduction in emissions by 2025 and a 50% cut by 2030.
The company’s carbon dioxide emission in the first half of 2023 totaled 15.4 metric tons, nearly flat vs. the 15.5 metric tons in the first half of 2022.
Our capital expenditure on decarbonization projects in 2023 first half was $95 million, lower than we anticipated when we set our targets. Our related operational expenditure increased to approximately $100 million.
Meanwhile, analysts forecast Rio Tinto’s full-year profit falling around 18% to $6.74 per share. Sales are expected to drop 9% to $50.64 billion, according to FactSet. Wall Street consensus is that the largest drop off vs. 2022 will be aluminum sales, falling 19%.
Rio Tinto’s revenue from iron ore, copper and diamonds is expected to stay mostly flat vs. 2022.
Lithium And Mining Outlook
On July 19, Rio Tinto announced its its $140 million lithium project in Argentina “remains under review in response to cost escalation.”
“We continue to engage with communities, the province of Salta and the Government of Argentina to ensure an open and transparent dialogue with stakeholders about the works underway,” Rio Tinto said.
The company added that exploration and evaluation expenses in the first half of 2023 totaled $710 million, a 94% increase vs. the first half of 2022. This was primarily due to Argentina and other projects.
On May 16, BHP and Rio Tinto laid out industry projections at the Bank of America Global Metals, Mining and Steel conference.
BHP sees mining operations as integral to the global energy transition. It estimates growing demand for steel, copper, nickel and potash. The mining firm does not currently mine lithium. BHP puts the industry’s total required investment for copper at around $250 billion by 2030.
Meanwhile, Rio Tinto expects a 3.9% compound annual growth rate (CAGR) for commodity demand, including steel, aluminum, copper and lithium, from 2022 to 2035.
JPMorgan recently put its expected annual demand growth rate for refined copper alone around 2.5% over the next decade.
Rio Tinto stock has a 64 Composite Rating out of 99. Shares have a 74 Relative Strength Rating. Rio Tinto stock has an EPS Rating of 48 out of 99.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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