Are Rio Tinto shares a buy on a pullback?

Should investors dig into this opportunity?

| More on:
a female miner looks straight ahead at the camera wearing a hard hat, protective goggles and a high visibility vest standing in from of a mine site and looking seriously with direct eye contact.

Image source: Getty Images

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 Rio Tinto Ltd (ASX: RIO) share price has dipped more than 6% since May 2024. It's common to see volatility when it comes to ASX mining shares, so investors may be wondering whether this sell-off is a buy-the-dip opportunity.

In the shorter term, commodity-focused stocks are often heavily influenced by movements with their respective commodity prices.

Rio Tinto is one of the largest players in the world, and its key commodity is iron ore. However, the iron ore price has dropped recently, so let's consider the situation there first.

Weakness in the iron ore price

According to Trading Economics, the iron ore price is under pressure amid inventories at Chinese ports recently hitting a two-year high, signalling "weaker demand from steel mills for metal production."

Trading Economics reported that analysts point to "widening losses among steelmakers and signs of falling hot metal output as dragging demand."  

The iron ore price has fallen to around US$110 per tonne, down from above US$140 per tonne at the start of the year and down from US$117 per tonne in May.

However, it's possible that the reduction of both the Rio Tinto share price and the iron ore price could be a buy-the-dip situation, particularly if the iron ore price were to rebound sooner rather than later.

Promising signs?

A couple of positives could lead to a better iron ore price, though we shouldn't base an investment decision on a possible short-term commodity movement.

Trading Economics reported that the latest data revealed that Chinese exports beat forecasts, with 8.6% growth in June. As an exporting and steel-heavy economy, good exports could mean more demand in the medium term for Australian iron ore.

According to Trading Economics, there is also hope that China will announce more financial stimulus at an important political gathering next week to boost the Chinese economy. Slowing inflation in the US may lead to a potential rate cut this year by the US Federal Reserve.

Is the Rio Tinto share price a buy?

The ASX mining share is currently rated as neutral by the broker UBS. The price target is $127, which implies a possible rise of more than 5% from today.

UBS notes that the copper mine Oyu Tolgoi's underground ramp-up is on track, while the huge iron ore project in Africa called Simandou is also progressing "to plan".

The broker said the ASX mining share has "improved operationally" and "should trade well if iron ore, copper and aluminium prices hold/move higher."

UBS predicts Rio Tinto can generate net profit after tax (NPAT) of US$12.1 billion in FY24 and US$12.3 billion in FY25 while paying annual dividends per share of US$4.48 in FY24 and US$4.56 in FY25.

I think Rio Tinto is a compelling miner, and its growing exposure to copper is attractive. However, the valuation does not look like it's at bargain levels to me. If the Rio Tinto share price fell under $110, or even under $100, that could be a better time to invest. That could happen if/when the iron ore price falls below US$100 per tonne.

Should you invest $1,000 in Rio Tinto Limited right now?

Before you buy Rio Tinto Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Rio Tinto Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

Lion roaring in the wild, symbolising a rising Liontown share price.
Materials Shares

Why did the Liontown share price rip 19% higher today?

This ASX lithium share was the fastest riser of the ASX 200 today.

Read more »

A female miner wearing a high vis vest and hard hard smiles and holds a clipboard while inspecting a mine site with a colleague.
Materials Shares

Why are Fortescue shares charging higher today?

What is getting investors excited today? Let's find out.

Read more »

Business people discussing project on digital tablet.
Materials Shares

What does Macquarie think Liontown Resources shares are worth?

Let's see if analysts think that this lithium miner is in the buy zone or best avoided.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Materials Shares

Lynas shares charge higher on big news

What is getting investors excited today? Let's find out.

Read more »

Lion holding and screaming into a yellow loudspeaker on a blue background, symbolising an announcement from Liontown.
Materials Shares

Liontown Resources shares roar higher on big news

This lithium miner is catching the eye with some big news. Here's what is happening.

Read more »

Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.
Materials Shares

What does Macquarie think BHP shares are worth?

Is now a good time to buy the miner's shares? Let's find out.

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Materials Shares

What does Macquarie think Pilbara Minerals shares are worth?

Is this lithium miner dirt cheap? Let's find out.

Read more »

Two miners standing together.
Materials Shares

Is it time to buy this beaten down lithium share?

This diversified miner’s share price has been hit on multiple fronts. What does it mean for investors?

Read more »