Once I scout for brand new additions to my UK shares portfolio, I gravitate in the direction of market tendencies. At present, commodities are within the highlight. Whereas some, like gold and silver, have already surged, there’s nonetheless important potential in different base metals comparable to iron ore and copper.

One option to faucet right into a transfer in a commodity is by looking for mining corporations. Rio Tinto (LSE: RIO) operates in 35 international locations and has a portfolio consisting of iron ore, copper and aluminium.

It trades at 4.5 occasions ahead EBITDA, in contrast with a sector common of 5.5 occasions.

Enlargement into copper

There was plenty of change occurring at Rio Tinto. Rio Tinto’s copper property, that are price $21bn, at the moment are larger than its iron ore enterprise. This displays the corporate’s funding in an enormous copper mine in Mongolia, which is simply beginning manufacturing.

Copper is extra thrilling than iron ore as a result of it’s essential to the vitality transition, and its demand is anticipated to double by 2040. Nonetheless, there may be some provide shocks alongside the way in which, which might push up its value. Rio Tinto’s growing publicity to copper would possibly make its fairness story extra engaging to buyers.

Low cost to Australian shares

A slight arbitrage profit for investing in Rio Tinto proper now could be the low cost it has on its Australian itemizing. The corporate is public on three exchanges: UK, US and Australian markets.

When changing each the UK and ASX shares into USD, the UK shares are discounted by round $18. It has been a worthwhile technique for companies prior to now to take advantage of this distinction by buying UK shares and shorting ASX shares. Nonetheless, as a retail investor, I can at the least profit from a smaller premium value proper now on the London Inventory Alternate for a corporation I’m serious about.

ESG

In a world the place emphasis on ESG is rising, Rio Tinto ticks the appropriate bins. The CEO mentioned, “Decarbonising our property de-risks our enterprise. It additionally opens up business alternatives as we broaden our position in offering low-carbon supplies.”

Not solely is Rio Tinto compliant with net-zero transitions, however additionally it is an organization that may assist change world wide by its rising operations in copper mining.

Dangers

There are dangers in terms of commodity corporations. Iron ore has supply-side cautions to lift.

Rio Tinto partly owns the Simandou challenge, a mining operation primarily based within the Simandou mountains in south-eastern Guinea. This challenge is anticipated to start out working this 12 months and will improve the worldwide iron ore market by as much as 15%.

China is the primary demand for iron ore by its property sector. The nation reintroduced metal manufacturing controls to cut back provide in order to not outweigh weak metal demand. This has a knock-on impact for iron ore, a key steel-making ingredient.

General

As Rio Tinto approaches its first-quarter 2024 manufacturing report, I’ll be intently monitoring the corporate’s efficiency metrics.

The corporate is thought for being a steady funding choice attributable to its low value volatility and a big dividend yield of 6.35%. Moreover, Rio Tinto has sufficient money to cowl curiosity funds, which supplies me with an additional layer of confidence.

My total ideas on Rio Tinto are that its growing growth and funding within the copper trade will profit the corporate in the long run and, with growing commodity costs, the quick time period. I’m strongly contemplating shopping for the shares for my portfolio quickly!