The Rio Tinto Ltd (ASX: RIO) share price has done quite well in the 2023 Australian financial year, rising around 10%. Could the next year be better?
Rio Tinto's own financial reporting year aligns with the calendar year, so it's only halfway through its current financial period.
As one of the largest miners in the world, its short-term performance is heavily linked to the changes in commodity prices. The iron ore mining division can make a ton of profit when its operations are doing well.
Iron ore price
Currently, the iron ore price is around US$115 per tonne. While that's a fair distance from the US$150 per tonne we witnessed not too long ago, the ASX mining share can still make a solid profit at this price.
The Chinese economy has not started firing on all cylinders after the COVID-19 lockdowns. If the efforts to boost the economy, such as the decision to reduce interest rates, support the property market and other sectors, then it could lead to stronger iron ore prices if there's an increase in demand.
However, the iron ore price is unpredictable, I wouldn't be surprised if the iron ore price went to US$100 per tonne or US$130 per tonne, perhaps both, over the next 12 months.
Copper
For me, copper is the most interesting element mined by Rio Tinto. The copper price has been strengthening recently, which bodes well for the company's copper earnings.
Rio Tinto points out that copper has various uses such as "pots and pans, in the water pipes in our homes, and in our car radiators. Copper also plays an essential role in computers, smartphones, electronics, appliances and construction." Electric vehicles use much more copper than traditional vehicles, and a 1MW turbine uses three tonnes of copper.
The business is involved with several copper projects. FY24 could see the business make a lot of progress with the Oyu Tolgoi copper project in Mongolia.
Copper demand is expected to slowly but steadily increase thanks to decarbonisation.
For me, iron and copper are the two most important elements for the company's performance over the next 12 months.
Dividend and earnings projections
Based on projections on Commsec, it's still expected to make a good profit and pay good dividends over the next 18 months.
For FY23, the Rio Tinto share price is valued at under 11 times FY23's estimated earnings, and it's priced at just over 11 times FY24's estimated earnings.
Regarding the dividend, it could pay an annual dividend per share of $6.05 per share, which would be a grossed-up dividend yield of 7.5%. In FY24, it could pay an annual dividend per share of $6.46, representing a grossed-up dividend yield of 8%.
Foolish takeaway
Based on the above projections, I'm not sure if the Rio Tinto share price will rise much more unless there's a material increase in the iron ore price, but the dividend could be rewarding.
