Rio Tinto Group

Summary

Softening Chinese demand will cut global metal prices as the country confronts its construction boom-turned-bust. Rio Tinto, with low-cost, high-quality, and geographically attractive production, will be less hurt than its non-Australian rivals. Growing demand for copper, particularly in electric vehicles and energy storage, will help offset falling iron ore prices. The biggest risk is the collapse of the Chinese real estate market and geopolitical tension between Australia and China. However, Rio has a strong credit rating, little debt, and plenty of cash.

• Stock: Rio Tinto Group ADR common stock

• Ticker: RIO 0.00%↑

• Date: August 1, 2022

• Market cap: $100bn

• Rating: Buy

• Price: $60.00

• Target: $78.60

Setting the stage

Rio Tinto is an Australian mining company. It primarily digs up iron ore in the Pilbara region of Western Australia but also produces aluminium, copper and other minerals. It makes money by extracting these ores and metals from the ground and processing and selling them.

More than half (…