Rio Tinto Plc (RIO), the world’s second- largest mining company, rose to its highest in 10 months as iron ore prices topped $140 a ton for the first time in eight months.
The shares gained 5.1 percent, or 179.5 pence, to 3,699 pence at 2:28 p.m. in London, the highest price since Feb. 28. The stock has risen 21 percent over the past six months, giving the company a market value of 71.1 billion pounds ($115.6 billion). European stocks advanced after U.S. lawmakers passed a bill that averted spending cuts and tax gains. The volume of shares traded at 5.4 million was 23 percent higher than the three-month daily average.
“There will be some macro rally, but it is mostly about iron ore,” Des Kilalea, an analyst at RBC Capital Markets in London, said in an interview. “Rio is 70 percent an iron ore company.” Kilalea has an outperform rating on the stock,
Iron ore prices, which were unchanged today, have risen 67 percent to $144.90 a metric ton at China’s Tianjin port, after touching a three-year low on Sept. 5, amid mounting confidence that China, the biggest buyer of the metal, will import a record amount in 2013. Accelerating economic growth in China is driving demand for steel used in construction.
Prices are also being supported by the shutdown of some iron ore mines in India after Supreme Court imposed bans in the states of Karnataka and Goa because of pollution concerns. That has helped lower-cost producers like Rio to gain market share.
Rio’s current share price implies investors are set for a 4.8 percent return, excluding dividends, over the next year, based on the average 12-month price target of 3,868 pence of 32 analysts tracked by Bloomberg. The potential return is the lowest in three years, according to data compiled by Bloomberg.
Rio is targeting savings of $5 billion by the end of 2014, while at the same time boosting production at its iron ore, copper and alumina units, it said Nov. 29.
Rio Tinto gained A$1.61, or 2.4 percent, to A$67.62 at the close in Sydney.
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