Shares in Rio Tinto Limited (ASX: RIO) have once again fallen today, down nearly 2% in afternoon trade. Since the beginning of 2014 it's down 12%.
Thanks to a falling iron ore price – down around 40% in 2014 – Rio and its rival miners have had a year they'd rather forget.
Whilst Rio has been able to avoid most of the selloff, pure play iron ore miners, Fortescue Metals Group Limited (ASX: FMG) and Atlas Iron Limited (ASX: AGO) are down 40% and 67%, respectively.
As Australia's largest iron ore miner, Rio's estimated breakeven cost is just $US43 per tonne. This compares with the more diversified BHP Billiton Limited's (ASX: BHP) breakeven price of around $US45 per tonne.
Fortescue, the world's fourth largest producer, has an estimated breakeven price above $US70 per tonne. However, its mines produce a lower quality ore and attract a discounted price to that of its two larger rivals. Currently iron ore sells for around $US82 per tonne.
But low cost of production isn't the only reason Rio shares have been shielded from the selloff. Its operations are diversified across commodities such as copper, coal and aluminium. Which gives it an edge over its rivals.
However, with 90% of profits derived from iron ore last financial year, it's no wonder the falling spot price has had such a profound effect on the $104 billion miner.
Buy, Hold, or Sell
Despite a bumper third quarter operations report (which included hints of a larger dividend payout) released yesterday and a seemingly cheap share price, Rio appears likely to remain a highly volatile investment for the foreseeable future. As such, risk-averse investors would be advised to keep their distance, for now.
