The ASX mining share Rio Tinto Ltd (ASX: RIO) has seen its share price fall more than 10% since May 2024, as the chart below shows.
Rio Tinto has suffered from volatility just like many other businesses. On Monday alone, the business dropped close to 5%.
Investors appear to be worried about how the start of Trump's second term has led to a building trade war rather than strong conditions for the business world.
However, as an investor, I like lower share prices because of the better valuations that often come with this share price action.
I'll tell you some reasons why I really like Rio Tinto shares.
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Take advantage of lower prices
Buying at better valuations can significantly increase the potential returns. It means buying at a higher dividend yield and getting the company at a cheaper price/earnings (P/E) ratio.
According to the forecast from UBS, the Rio Tinto share price is valued at 11x FY25's estimated earnings, with a possible grossed-up dividend yield of 9%, including franking credits.
If the Rio Tinto share price were to fall even further, then I'd suggest it would be even better value.
While it can be uncomfortable investing during volatility, I think it makes more sense than buying when share prices are booming.
Increased copper and aluminium earnings
In my view, Rio Tinto is benefiting from a shift in its earnings with key commodities other than iron ore, namely aluminium and copper.
In the FY24 result, the business reported that its aluminium underlying operating profit (EBITDA) grew by 61% to $3.7 billion and copper underlying operating profit rose 75% to $3.4 billion.
Both of these businesses benefited from stronger pricing, which is a helpful tailwind.
I'm particularly excited by the company's growing exposure to copper. The large Mongolian project Oyu Tolgoi saw volume rise 28% in 2024 and I expect further volume growth in the coming years. The company is expecting to grow production by 50% in 2025, with further growth in the years after that.
Rio Tinto is expecting copper earnings to grow in the coming years, partly because of the limited future supply that may come online in the foreseeable future.
Copper is used in a variety of different products. It's used in homes, electricity grids, computers, smartphones, electronics, appliances, wind turbines, electric vehicles and more. Future demand looks good for copper and Rio Tinto's exposure to the commodity.
Iron ore price remains solid
The iron ore price is a very important input for how much profit Rio Tinto can make. The ASX mining share's biggest earnings generator is still iron ore, and its part-ownership of the huge Simandou project in Africa could help grow its iron ore production further.
Of course, there's a danger that the iron ore price could decline if the global economy weakens, particularly if demand from China reduces amid pain from Trump's trade war.
According to Trading Economics, the iron ore price is still sitting above US$100 per tonne, which may allow Rio Tinto to continue generating solid iron ore earnings.
With the Rio Tinto share price lower, I think there's potential for the company's profit to positively surprise the market, making today's value attractive with a pleasing dividend yield.
