Rio Tinto Down 1.23%, Prompted by Falling Oil Prices

Shares of Rio Tinto Ltd [ASX:RIO] have fallen in value by 1.23%, alongside fellow mining giant BHP Billiton Ltd [ASX:BHP], which slid down the ASX in early morning trading to a similar degree.

Last week, the companies were two of the highest performers on the ASX 200. From a perspective of market capitalisation growth, they gained more than $3 billion and $1.6 billion respectively.

Why has the share price fallen this morning?

The minor dip could be attributed to falling oil prices overnight. According to Bloomberg, WTI crude oil fell 0.1% to US$66.04 a barrel, and Brent crude oil dropped 1.3% to US$75.45 a barrel.

Last week, there was a copper mine strike in Chile which BHP has a stake in. That may have rattled the sector in general. However, recent developments have indicated that the unions and the company have come to an agreement, so the strike is unlikely to cause any long-term damage.

Rio Tinto has experienced, in general, a healthy level of growth as of late, due to its recent business transaction involving the sale of its interest in the Winchester South coking coal project, a deal valued at $200 million.

The oil titan has also furthered its relationship with Chinese miner Minmetals, signing a $7.2 million exploration joint venture. On Friday last week, Rio confirmed the contract in a trading update.

The partnership has been in discussion for over a year.

Rio Tinto chief executive Jean-Sébastian Jacques said:

The formalisation of the exploration joint venture is an important milestone in our growing partnership with China and Minmetals, who is an increasingly important player in the global mining industry. Our complementary strengths in exploration put us in the best possible position to find metals and minerals essential to human progress.

China Minmetals Corporation president Guo Wenqing said:

The collaboration is very significant to Minmetals. Rio Tinto has rich prospecting experience and great discoveries worldwide, while Minmetals has solid technical expertise and extensive experience — the two strong partners will drive breakthroughs, pioneer progress, and promote the exchanges and collaboration of the global resource industry.

What’s next for Rio Tinto?

Despite a falling oil price, Aussie oil and gas companies are still attractive options for investors. Cross-cultural contracts represent untapped economic opportunity, while intelligent leadership at the helm inspires confidence.

It’s worth noting that JP Morgan has predicted an oil downturn in the coming months.

But in an analyst note, he is quick to reassure the market by speculating that ‘prices will be corrected downwards towards the end of the year and remain capped in 2019.’

It’s likely that smarter investors will be able to remain cautious of volatile commodity prices, without letting brief periods of instability mar their chances at profiting from what looks to be an extraordinary opportunity in China.



Ryan Dinse,

For Money Morning

PS: What other opportunities lie in the 2018 mining boom? We’ve investigated 10 ASX mining stocks that could make you huge money in the next 12 months and beyond. Claim your free report here.

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

Ryan's premium publications include:

Money Morning Australia