Rio Tinto Shares Testing Resistance at A$180

Rio Tinto shares (ASX: RIO) are changing hands at A$179.97, up 2.26%, after touching A$180.88 intraday. The move puts Rio’s share price within a whisker of the A$180 resistance that has become a level to watch, having seen recent rallys topping out just below.

Both attempts, in mid August, and then later that month saw RIO fail to close above the line, which had previously acted as support back in May and June of this year, prior to the July pullback.

Rio has lagged its great rival in this year’s resources rally, rising 21.75% year-to-date against BHP’s gain of 40.23%. With BHP already trading at record levels and widely held as the preferred large-cap mining exposure, Rio is increasingly being treated as the relative-value laggard in the sector, and today’s buying has the fingerprints of rotation flows as much as outright enthusiasm.

This week’s Aurukun announcement has also seen Rio agree to acquire the bauxite project in Western Cape York from Glencore and Mitsubishi Development, subject to Queensland government and regulatory approvals. Aurukun sits close to Rio’s existing Cape York bauxite operations and slots neatly into its aluminium supply chain.

Copper is doing much of the heavy lifting in the background. Comex copper trades close to an all-time high having hit US$6.80 a pound, and remains 48% higher year-on-year, with LME prompt premiums widening and warehouse stocks falling, a combination that signals genuinely tight physical supply. Rio is a direct beneficiary, with copper now the company’s second-largest earnings contributor, the Oyu Tolgoi underground ramp-up in Mongolia remains on track with a target of around 500,000 tonnes a year of recoverable copper from 2028 to 2036, and copper, aluminium and lithium together accounted for more than half of underlying EBITDA in the first half.

Looking at the fundamental story, recent earnings showed underlying EBITDA rising 28%, underlying earnings climbed 43% and free cash flow jumped 75% year-on-year, helped by stronger prices, higher volumes and a productivity program that has already locked in US$870 million of gains against a US$1.8 billion annualised target. Iron ore still anchors the story, and futures holding above key technical levels have historically been a reliable tailwind for the stock.

View From The Street

The average price target on the Street at A$165.77 sits almost 8% below today’s trading level, suggesting analysts remain less convinced about the move. On the technical side however, the setup remains bullish with the share price above its 50-day average of A$168.61, which itself sits above the 200-day of A$160.63, with EMA’s similarly in line. With the stock once again hitting resistance at A$180, today’s action looks like a test rather than a break, but one that is worth watching.

A breakout that holds above A$180 on solid volume, supported by continued strength in copper and iron ore pricing, could well support higher moves. Yet on the flip side, any reversal in copper prices, iron ore, or softer Chinese demand signals, could see near term sentiment shift.

Plenty to keep both sides of the bull/bear divide interested as the day, and week progresses.