Rio Tinto shares rise on RBC upgrade

Rio Tinto shares gained on Thursday as RBC Capital Markets raised its rating on the stock to ‘outperform’ from ‘sector perform’ and lifted the target price to 3,400p from 2,200p.

RBC said Rio provides the “most attractive valuation” in the sector and the “best in class growth”.

The miner is also set to benefit from a more positive view on the iron ore market, RBC said.

“Over the medium term, iron ore’s shift back to structural balance will potentially see prices move back to the sharp end of the cost curve,” RBC analysts Alexandra Slattery and Tyler Broda said in a note.

“We see this as an attractive entry point for long-term investors.”

The analysts said they believe Rio’s new chief executive Jean-Sebastien Jacques will continue to lead a “strategically conservative” company. They see the CEO driving consistent focus on Tier I assets, maximising cash flow and maintaining capital discipline.

“The other reality is that large-scale Tier I mining projects can take 5–10 years to be delivered. “Although we agree that RIO's growth is longer-dated, the quality of the Rio Tinto growth is very high and it is adding Tier I assets into the portfolio for next decade, something still to be delivered by peers.”

Shares rose 1.56% to 2,371.51p at 0950 BST.