Rio Tinto shares fall further as UBS keeps ‘sell’ call

The world’s second largest mining corporation had its market capitalisation erased by 10% in two sessions.

  • Rio Tinto (ASX: RIO) share price continues to fall on Monday (20 September 2021)
  • The current sell-off is caused by plunging iron ore prices
  • Meanwhile, rivals FMG and BHP also suffered big drops of 11% and 4% each on Friday
  • Feeling bullish or bearish about Rio Tinto shares? Open an account with us to go long or short on the stock today.

Rio Tinto stock price: what’s the latest?

Rio Tinto shares fell another 5.5% on Monday morning, as the effects of suppressed iron ore prices remained acute.

The mining stock opened the session just below its previous close of A$98.80, only to drop to a low of A$93.42 by noon time.

Iron ore prices, which peaked at US$233 per tonne in May, have gone into free fall mode since mid-July. Last week, the mineral recorded its worst week since the 2008 global financial crisis, as its price was wiped out by 20%.

As of Monday, iron ore is trading at a 14-month low of US$104.50 per tonne, a price level last seen in July 2020.

The mineral’s current price levels equate to a peak-to-trough decline of roughly 55% – a massive collapse for Australia’s arguably most important export.

As a result of the ongoing bearishness, Rio Tinto’s stock price has fallen by nearly 13% in the last one month alone and 19% year-to-date.

How do analysts view Rio Tinto?

UBS researchers reiterated a ‘sell’ call on Rio Tinto, alongside a lower iron ore price forecast of around 10%.

‘The correction in iron ore prices has played out faster than expected,’ UBS analyst Lachlan Shaw said.

‘We expect the iron ore market to swing into surplus in the second half of 2021, prices to fall below $US100 a tonne over the next few months, before averaging $US89 a tonne in calendar year 2022.’

On the other hand, Macquarie analysts maintained a bullish stance on Australia’s iron ore complex, maintaining ‘outperform’ ratings for Rio Tinto and its competitors.

‘We remain positive on stocks with iron-ore exposure due to strong cash flow yields and earnings upgrade momentum,’ the investment bank said.

Rio Tinto approves new solar farm

Changing gears, Rio Tinto said on Monday that it has approved a new solar farm and battery storage at Weipa in Queensland, ‘in a move that will more than triple the local electricity network’s solar generation capacity and help provide cleaner power to Rio Tinto’s operations’.

Under the plans, EDL has been contracted to build, own and operate a 4MW solar plant and 4MW/4MWh of battery storage at Weipa.

Work on the battery facilities will start this year, with construction of the whole project expected to be complete by late 2022, the group said in a press release.

The new solar farm and battery storage will complement the existing 1.6MW solar farm at Weipa, which was completed in 2015 and is also owned and operated by EDL.

The 4MWh battery system will be built next to the existing Weipa power station and will help provide a stable power network for Rio Tinto’s Weipa Operations bauxite mines and the Weipa township.

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