The Rio Tinto Limited (ASX: RIO) share price has been marching higher since the beginning of the year.
At the time of writing, the mining giant’s shares are 1.94% higher to $122.88. This is a sharp recovery from when its shares were trading around the $88 mark in early November.
In 2022, Rio Tinto shares have gained more than 22%.
What’s driving Rio Tinto shares higher?
There are a few factors as to why the Rio Tinto share price is trading in positive territory this year.
Firstly, the accent of iron ore prices is providing a strong support base for the company’s margins thus far in FY22. This is predominately being driven by supply constraints caused by the COVID-19 outbreak in China.
Regarded as a key commodity in Rio Tinto’s portfolio, this is particularly important given a majority of the company’s revenues come from the steelmaking ingredient.
In the financial year ending 31 December 2021, iron ore accounted for 62% of the total group sales revenue.
In addition, the S&P/ASX 200 Resources Index (ASX: XJR) has also pushed ahead, gaining almost 21% in 2022. The sector represents 48 of the largest companies in the S&P/ASX 200 Index (ASX: XJO) in the energy, metals, and mining industry.
A positive shift in investor sentiment toward the index has propelled Rio Tinto shares higher.
Can Rio Tinto shares reach a record high in 2022?
If the Rio Tinto share price is to break its all-time high in 2022, iron ore prices will need to accelerate further.
Rio Tinto shares broke a record high of $137.33 in August 2021.
Iron ore prices reaching levels above US$200 per tonne will, indeed, translate to bumper profit for the world’s largest iron ore miner.
In its full-year results, Rio Tino revealed iron ore shipments of 321.6 million tonnes, down 3% on FY20. This was impacted by above-average rainfall in the first six months of 2021.
The 2021 monthly average Platts index for 62% iron fines converted to an FOB [free on board] basis was 45% higher on average compared with 2020.
Rio Tinto attained average revenue of US$143.8 per dry metric tonne.
Following the company’s FY21 financial scorecard, analysts at Goldman Sachs raised their outlook on Rio Tinto shares by 2.1% to $131.50.
In addition, the team at Morgan Stanley lifted its 12-month price target by 7% to $130.50.
It appears that each of the brokers believes that Rio Tinto shares are slightly undervalued for the time being. The above assessment reflects a potential upside of around 7%.
However, it’s worth noting that the above price target is under the record price Rio Tinto shares achieved mid-last year.
Rio Tinto share price summary
Adding to today’s gain, the Rio Tinto share price has surged 22.65% in 2022.
However, when looking across the past year, the mining outfit’s shares are up around 1.6%.
After reaching an all-time high of $137.33 in August 2021, investors heavily sold off the company’s shares.
Rio Tinto hit a 52-week low of $87.28 in November before quickly rebounding higher of late.
The company has a price-to-earnings (P/E) ratio of 6.93 and commands a market capitalisation of roughly $45.5 billion.
The post Can the Rio Tinto share price break its all-time high in 2022? appeared first on The Motley Fool Australia.
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More reading
- Goldman Sachs names 3 ASX 200 mining shares to buy today
- Here are the top 10 ASX mining companies by market cap
- If you’d bought $10,000 of Rio Tinto shares 5 years ago, here’s how much you’d have now
- ASX mining shares were the leaders last quarter. Here are the top performers
- The Rio Tinto share price rallied 19% in the March quarter. What’s next?
Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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