Are the Rio Tinto, Fortescue and BHP share prices a buy right now?

Why I think the Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG) and BHP Group Ltd (ASX: BHP) share prices could be a buy for dividends right now.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The iron ore spot price continues to go from strength to strength, topping US$100 per tonne for the first time this year. China's iron ore futures market opened more than 6% higher on Monday after top miner Vale SA was ordered to shut operations at a site that accounts for approximately 10% of its output.

Could supply woes make the Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG) and BHP Group Ltd (ASX: BHP) share prices a buy?

Vale SA to close multiple sites 

The Australian Financial Review (AFR) reports that a Brazilian labor court judge ordered Vale SA to close multiple sites after a COVID-19 outbreak among workers.

Investors may remember Vale's tailings dam collapse in late January 2019. This tragic incident killed 237, left 33 missing and nearly 1,000 displaced. The closure of this mine site resulted in significant supply woes for the global iron ore market. This supply imbalance caused the iron ore spot price to soar from ~US$70 to more than US$120 per tonne in July 2019. This also saw the Rio Tinto, Fortescue and BHP share prices hit record highs or price levels not seen since the GFC.  

Australia is the largest iron ore producing country in the world and is also fortunate enough to have largely tackled the spread of the coronavirus. However, other producers that play a vital role in the iron ore supply chain such as Brazil, Russia and India are still at various stages of the curve and ranked 2nd, 4th and 5th, respectively, for active cases globally. This is likely to see an impact on various parts of their economies, including mining. 

Aussie miners to benefit 

The Rio Tinto, Fortescue and BHP share prices are likely to continue to push higher following strong spot prices. Elevated iron ore prices will continue to support the market-leading dividends paid by Aussie miners. At the time of writing, Rio Tinto currently pays a dividend yield of 5.77%, BHP pays 5.87% and Fortescue pays 6.88%.

From a risk/reward perspective, it may be challenging for investors to buy Fortescue at its current record all-time high prices. Alternatively, I believe it is feasible for the Rio Tinto and BHP share prices to revisit their previous highs. This can be further supported by the swift recovery of other commodities such as copper, coal and oil that make up a small proportion of the ASX 200 miners' materials portfolios.

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

Three miners looking at a tablet.
Resources Shares

3 ASX mining shares to sell today: experts

These iron ore, coal, and lithium miners have attracted sell ratings from brokers.

Read more »

Miner looks into the distance as he checks a folder.
Resources Shares

Mineral Resources share price plunges as debt weighs on miner

Fundamental issues continue to plague the diversified miner.

Read more »

Three miners looking at a tablet.
Resources Shares

Buy, hold, or sell? Here's what Morgans is saying about these ASX mining stocks

Are these miners buys, holds, or sells?

Read more »

Australian notes and coins symbolising dividends.
Dividend Investing

Why did the Rio Tinto dividend just shrink to 7-year lows?

Rio Tinto just slashed its half-year dividend payout. But why?

Read more »

Iron ore price Vale dam collapse ASX shares iron ore, iron ore australia, iron ore price, commodity price,
Resources Shares

Why this expert is calling time on Fortescue shares

A leading expert delivers his verdict on Fortescue shares.

Read more »

Happy man working on his laptop.
Resources Shares

Prediction: In 12 months this scorching ASX mining stock could turn $1,000 into $1,750

Brokers are impressed with high production forecasts.

Read more »

View of a mine site.
Resources Shares

Core Lithium share price tumbles as investors await Finniss restart

Investors are bidding down Core Lithium shares today. But why?

Read more »

View of a mine site.
Resources Shares

Mineral Resources shares lift off on record results

ASX investors are piling into Mineral Resources shares following the miner’s quarterly results.

Read more »