CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Are BHP, Rio Tinto shares a ‘buy’ now?

Global iron ore producers BHP and Rio Tinto have been beset by challenges in China, including a recent power shortage.

BHP Rio Tinto share stock price target ratings Source: Bloomberg
  • BHP (ASX: BHP) share price sheds 2.8% day-on-day
  • Rio Tinto (ASX: RIO) slides to A$95.17 per share
  • Some factories in China paused production, depressing iron ore prices
  • But the mining heavyweights’ dividends could stay above pre-Covid levels
  • Keen to bet on BHP Group and Rio Tinto’s falling share price? Open an account with us to go short on the stocks.

Heavyweight mining stocks slide further

Shares of Rio Tinto and BHP, part of Australia’s big mining triumvirate, continued to skid on Wednesday as investors weighed the potential impact of China’s widening power crunch as well as the Evergrande fallout.

As of 11:42 AEST in Sydney, BHP was trading 2.8% lower at A$35.84, while Rio fell 2.4% to A$95.17 per share.

In China, a power shortage has halted production at several factories, including many that supply components to Apple Inc and Tesla Inc, Reuters reported.

The resultant demand concerns thus depressed iron ore and base metal prices, weighing on mining giants’ shares. Australian miners are dependent on Chinese demand for raw materials.

Miners’ dividends ‘well covered’: Bloomberg

Despite the falling free-cash-flow of metals and mining companies, their dividend payments ‘should remain above pre-pandemic levels’, said Bloomberg Intelligence (BI) on Tuesday.

BI expects the overall high iron ore price in 1H 2021 to enable Rio and BHP to pay high dividends, which should be ‘well covered’ from 2021 to 2023, assuming iron ore stays at roughly US$100 per tonne.

Given their low financial leverage, Rio and BHP may use their balance sheets to increase shareholder remuneration via special dividends or buybacks, the analysts added.

What is the outlook on BHP shares?

BHP’s ASX-listed stock attracted seven ‘buy’ ratings from analysts, as well as five ‘hold’ and one ‘sell’, as of Wednesday.

On average, the research teams targeted A$47.80 per BHP share, Bloomberg data showed. That implies a potential upside of nearly 30% based on Tuesday’s close.

Since late last week, fresh recommendations from analysts have been optimistic. BHP was rated ‘outperform’ or ‘buy’ by RBC Capital, Macquarie, Morningstar, Bernstein, Shaw and Partners, and Jefferies.

The target prices from these bullish analysts ranged from A$42 to A$61, according to Bloomberg data.

Rio Tinto reaches labour deal in Canada

On Sunday, Rio said it has reached an agreement in principle with Canadian union Unifor for the company’s operations in the western Canadian province of British Columbia, after weeks of second-round negotiations.

The first round, regarding proposed changes to workers’ retirement benefits and unresolved grievances, fell through in July.

Meanwhile, the Australia-listed RIO shares garnered seven ‘buy’, seven ‘hold’, and two ‘sell’ calls from analysts as of Wednesday.

Their average target price was A$119.49, according to Bloomberg data. That implies a potential upside of about 23% based on Tuesday’s close.

Operationally, Rio ‘remains a turnaround story’, said JPMorgan. The analysts are ‘overweight’ on the stock and targeting A$150, favouring its ‘relatively inexpensive valuation metrics and strong shareholder returns’.

Thinking of trading BHP and Rio Tinto shares?

Take your position on BHP, Rio Tinto and over 13,000 Australian and international shares via CFDs and trade it all seamlessly from one account.

Learn more about share CFDs or shares trading with us, or open an account to get started today.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.