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Rio Tinto share price testing support after operational update


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Rio Tinto Q3 production mostly flat, although copper output has gained.

BG_rio_tinto_34234234.jpgSource: Bloomberg
 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Wednesday 19 October 2022 

Rio Tinto operational review

Rio Tinto, the UK based mining and metals company has released an operation update for the fiscal quarter and nine months ending September 2022.

Salient feature of the update are as follows:

  • Pilbara iron ore shipments down 1% against Q3 and 9 months 2021 comparisons

  • Pilbara iron ore production up 1% against Q3 2021 and 0% vs 9 month 2021 comparisons

  • Bauxite production down 2% against Q3 2021 and up 1% vs 9 month 2021 comparisons

  • Aluminium production down 2% against Q3 2021 and 7% vs 9 month 2021 comparisons

  • Mined copper production up 10% against Q3 2021 and 8% vs 9 month 2021 comparisons

  • IOC iron ore pellets and concentrate production up 28% against Q3 2021 and 8% vs 9 month 2021 comparisons

Forward guidance

Full year production guidance for bauxite, alumina, aluminium, mined copper, diamonds, iron ore pellets and concentrates remain unchanged.

Plibara iron ore shipments are now expected to err towards the lower end of the 320 to 335 previously guided range.

Refined copper production guidance has been lowered to between 190 to 220 from 230 to 290.

Broker ratings and price targets

101822_RIO.pngSource: Refinitiv

Data compiled from Refinitiv Workspace shows the consensus of 25 broker ratings on Rio Tinto to be a hold as of the 19th October 2022.

The long term price target mean of GBP55.97 suggests the current price of the share to be at a 19% discount to what is considered a longer term fair value for the company.

Client sentiment

101822_ClientSentiment.pngSource: IG

As of the 19th October 2022, 92% of IG clients with open positions on Rio Tinto expect the price to rise in the near term while 8% expect the price to fall in the near term.

Rio Tinto- Technical View

101822_RIOtv.pngSource: IG Charts

The share price of Rio Tinto currently trades in a broad range between levels 4420 (support) and 5150 (resistance).

The price is now moving towards tentative trend line support (dotted trend line), a break of which (confirmed with a close below) would suggest 4550 and 4420 as respective downside support targets.

Due to the share price being in a broad rangebound environment and trading closer towards historical support levels, our preference is to wait to enter new long positions on the stock.

Before finding long entry, we would like to see a bullish price reversal at one of our support levels (trend line, 4550 or 4420). In this scenario, the reversal low could be used as a stop loss indication, while targeting a move back towards the 5150-resistance level.

In summary:

  • Full year production guidance for most of the group’s commodities remain unchanged
  • Plibara iron ore shipments are now expected to err towards the lower end of the 320 to 335 previously guided range.
  • Refined copper production guidance has been lowered to between 190 to 220 from 230 to 290.
  • The average broker rating on the stock is ‘hold’
  • Most IG clients with open positions on the stock expect the price to rise in the near term
  • The price is currently testing support while in a rangebound environment
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