Rio Tinto Ltd (ASX: RIO) shares have seen plenty of volatility since the start of 2023, as we can see on the chart below. Sometimes significant price movements can throw up opportunities.
It has almost reached $130, but it has also been as low as roughly $105 – that was a decline of almost 20%. But it has subsequently risen by around 10%.
With everything that's been going on, is the Rio Tinto share price an opportunity? I'm going to look at the positives and negatives of the current situation.
The positives
The ASX mining share has been steadily putting money and efforts into growing and diversifying its project portfolio.
Just yesterday, it announced that it was spending hundreds of millions of dollars on increasing its production and efficiency at the Kennecott copper mining operations in the US. It's also spending hundreds of millions of dollars on rebuilding its smelter there, as well as in other areas.
At the end of March, it announced it was partnering with First Quantum Minerals to progress the La Granja copper project in Peru. Rio Tinto says this is one of the largest copper projects in the world.
At the end of December, it completed the acquisition of Turquoise Hill for US$3.1 billion. This meant that Rio Tinto now owns 66% of Oyu Tolgoi, another major copper project.
It's rapidly growing its presence in the copper space, where Rio Tinto sees global demand steadily rising thanks to global decarbonisation.
The business has been looking to grow in lithium as well, though Rincon is the only project it's successfully progressing at this stage.
What I like about this is that it should mean in the coming years that Rio Tinto is less reliant on its iron earnings.
Finally, I'll say that the dividend yield is also a positive. For FY23, it's projected to pay a grossed-up dividend yield of 9.3%.
Negatives about Rio Tinto shares right now
ASX mining shares aren't the sorts of businesses that deliver profit growth year after year for a long period of time. They usually go through a cycle, depending on what the commodity price does, which is largely impacted by supply and demand.
The iron ore operations have been key for profit generation in the past and remain the integral segment, for the foreseeable future at least. It's still heavily reliant on China buying lots of Australian iron ore, which might not always be the case, particularly if there is an increase in African iron ore in the global market.
With the above in mind, I think there could be times when the Rio Tinto share price falls materially below where it is today, which could prove to be a much better buying opportunity.
How much lower could it go? Well, let me just check my crystal ball here…
If I were trying to deliver significantly market-beating returns, I'd suggest a fall of about 20% (if that ever happened) from the current Rio Tinto share price could be a very appealing price for the future dividend yield and longer-term total shareholder returns. But, I'd be happy to buy a few shares at the current price with future-focused commodities in mind.
