Rio Tinto PLC [ASX:RIO] is an Australian-British mining company. With 2015 revenues of US$69.4 billion, it is the third largest mining company in the world (following Glencore and BHP Billiton) and leader in bauxite mining.
While no stranger to controversy — from corruption allegations to SEC inquiries — the company has managed to beat the odds and carry on.
Rio Tinto has experienced two years of gains…it’s been picking up steam since January 2016.
Is this tough June a reversal of that trend, or just a short-term hiccup?
Why did this happen to Rio Tinto’s shares?
The metal and mining industry has experienced a revival in a time of renewed global growth.
But is their time in the sun finally coming to an end?
Trump’s ‘tariff tantrum’ will be particularly painful for Rio Tinto — he’s pushing a 25% tax on steel and a 10% tax on aluminium, which are some of the company’s largest exports.
Credit Suisse also predicts that a rising trend in aluminium prices could reverse soon; higher commodity prices are, of course, favourable to RIO.
The common stock rating has been downgraded from buy to hold/neutral by numerous sources, including Bank of America and HSBC.
Each is out of the company’s hands, but is likely weighing on their stock.
What’s next for Rio Tinto?
As they’ve proved able to do, Rio must again weather a tougher and more uncertain environment.
But while recent events weigh on profits, they may benefit from a relatively high degree of diversification.
Also on the horizon is the sale of its stake in the Indonesian Grasberg mine, and potentially a sizeable share buyback or dividend.
We’ll be keeping our eyes peeled — and I’m sure you will, too.
For Money Morning
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