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Own Rio Tinto shares? Why CEO has ‘no particular concern’ over China and iron ore price

The outlook for iron ore is cloudy.
The post Own Rio Tinto shares? Why CEO has ‘no particular concern’ over China and iron ore price appeared first on The Motley Fool Australia. –

The Rio Tinto Limited (ASX: RIO) share price has been falling in recent weeks. It’s down by around 18% since 8 June 2022.

The ASX mining share earns a dominant portion of its profit from iron ore.

Like most other commodity ASX shares, Rio Tinto shares are heavily affected by changes in the resource price because this can have sizeable impacts on the potential profitability of the business.

Indeed, the iron ore price has been falling in recent weeks as well.

One of the main factors that may have been catching investor attention has been the formation of a Chinese entity, the China Mineral Resources Group. The concern is that this body may seek to bulk buy iron ore for a number of major players in China, exerting influence to purchase iron ore at a lower price. This could certainly affect many ASX mining shares.

But it seems Rio Tinto isn’t particularly concerned by this development.

Rio Tinto boss responds

Rio Tinto CEO Jakob Stausholm commented on the China Mineral Resources Group during an earnings call about the company’s 2022 second quarter:

Look, I think we need to step back and figure out what is facts and what is rumours. I mean, we all know that there was an inaugural meeting of this entity, the day before yesterday. How they will act in the market is rumours. And, and I don’t want to speculate on that. I have no particular concern. We have worked for the last 50 years successfully with China for the benefit of Rio Tinto and I believe we have also been helpful in China developing the steel industry. So, I’m very confident that will continue.

But, it’s not as though Rio Tinto, BHP Group Ltd (ASX: BHP), and Fortescue Metals Group Limited (ASX: FMG) are tiny businesses with no market power and no ability to alter their plans.

Responding to whether the formation will lead Rio Tinto to change its strategy and invest more heavily in Australia, Stausholm said:

We are not changing the thinking position within Rio Tinto based upon the market rumours about this, so, no, I cannot see that linkage.

FY22 half-year earnings recap

Rio Tinto delivered its report for the six months to 30 June 2022.

It said that net cash generated from operations fell 23% to US$10.5 billion. Free cash flow dropped 30% to US$7.15 billion. The underlying earnings before interest, tax, depreciation and amortisation (EBITDA) declined 26% to US$15.6 billion.

As a result of the profit decline, the ordinary dividend was reduced to US$2.67 per share, a drop of 29%.

Rio Tinto share price snapshot

Over the last month, the Rio Tinto share price has dropped 2.5%. However, over the past six months, Rio Tinto shares have shed 12%.

The post Own Rio Tinto shares? Why CEO has ‘no particular concern’ over China and iron ore price appeared first on The Motley Fool Australia.

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More reading

‘Not immune’: How Rio Tinto shares are feeling the sting of inflation
Broker tips 26% upside for Rio Tinto share price post-results
ASX 200 midday update: Rio Tinto drops, tech shares jump, Macquarie impresses
Did the Rio Tinto interim dividend really just tumble 52%?
Why is the Rio Tinto share price underperforming today?

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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