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Rio Tinto shares climb above 200dma as green investment grows: What next?

By Indrabati Lahiri

16:27, 1 December 2022

Aerial view of an old copper mine
Rio Tinto's shares have risen following the miner revealing its financial year 2023 production guidance – Photo: Getty Images

Rio Tinto (RIOau) has recently crossed above its 200-day moving average, following the miner revealing its financial year 2023 production guidance, in which it stuck to its 2022 targets. This seems to have considerably boosted investor confidence and reflected in the share price, as a number of other miners have been cutting production guidance in the last few months.

The FY2023 production guidance is also expected to provide a market outlook for the next year, as well as shed more light on Rio Tinto’s stance and investments in the green transition. The company has already announced significant investments in renewable energy in Western Australia, which forms the bulk of its operations.

Rio Tinto (RIOau) shares have risen following the release of FY2023 production guidance 

What is boosting Rio Tinto (RIOau)’s share price currently?

Rio Tinto has kept its 2023 production guidance for iron ore and bauxite the same as 2022, which has gone a long way to give investors the hope of some stability in the coming year, as these are two of the miner’s biggest commodities.

Alumina guidance has increased from 7.6 to 7.8 megatonnes (Mt), in 2022, to about 7.7 to 8.0Mt in the next year. Aluminium guidance has also increased similarly, going up from about 3.0Mt to 3.1Mt in 2022, to about 3.1Mt to 3.3Mt in 2023.

Coming to copper, however, things are a little trickier, as mined copper production guidance has increased from about 500,000 tonnes to 575,000 tonnes in this year, to 550,000 to 600,000 in the coming year. However, refined copper guidance has fallen from about 190,000 tonnes to 220,000 tonnes in 2022 to about 180,000 to 210,000 tonnes for 2023.

Rio Tinto has also announced that it would be investing about $3 billion per year to meet increased demand pressures arising from an accelerating energy transition. This demand will mostly come from copper, which is a key metal in the green transition. This is mostly due to its varied uses in electric vehicles, as well as a multitude of renewable energy solutions, such as solar panels, wind, thermal and more.

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The miner has also revealed that it would be investing an additional about $600 million in its iron ore operations in Pilbara, Western Australia, in order to speed up the implementation of renewable energy at its mines. This new expenditure is in addition to a previous $7.5 billion allocated to renewables in 2021.

This is in line with the company’s plans to diminish its carbon emissions by about 50% by 2030, as both iron ore and steel are highly energy intensive metals to process. This has led to manufacturers of these metals coming under increasingly uncomfortable pressure from investors, governments and international bodies to adopt more sustainable practices.

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Rio Tinto (RIOau) technical analysis

According to Piero Cingari, markets specialist at Capital.com , “The recent price activity in Rio Tinto shares has been extraordinary from a strictly technical standpoint. After hitting a double bottom on the end of October, RIO managed to overcome some key resistance levels: 50-day moving average, 200-day moving average, 2022 bearish trendline and 50% Fibonacci retracement level of 2022 range, in order.

The stock price is currently testing the 61.8% Fibonacci level, which also corresponds to mid-June highs. The rally in the last month has been rather sharp (29%), causing RSI to enter overbought levels. Bulls seem to have regained control of the trend, and the latest price action may resemble a bullish flag pattern, which projects the 2nd pole to 120 AUD.

Despite the fact that the bearish trend has been broken, some profit-taking activity may emerge as a result of the recent strong price action. The nearest support is at 108 (50% Fibonacci), and below that at 104 (200dma), where bulls might re-emerge on dips.”

Rio Tinto (RIOau) share price has recently risen above the 200-dma

Rio Tinto chart showing shares crossing above the 200-day moving averageRio Tinto recently saw shares rise above the 200-day moving average – Credit: TradingView

Markets in this article

Aluminum
Aluminium Spot
2231.2 USD
25.2 +1.150%
Copper
Copper
3.87084 USD
0.04587 +1.200%
TSI
Iron ORE Spot
869.40 USD
-45.6 -5.000%
RIOau
Rio Tinto
128.20 USD
-0.71 -0.550%

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