Rio Tinto Limited [ASX: RIO] is up by 1.24% this morning as it closes in on a 10-year high. The shares are trading at $84.92 right now.
If the mining giant can broach the $90 line, it will be the highest the share has traded since February 2011.
What caused the rise?
Fellow mining company BHP has also seen a rise by more than 120% in the last two years, prompting questions about how investors can capitalise on these spectacular industry gains.
Michael McCarthy, chief marketing strategist at CMC Markets Stockbroking has pointed to numerous factors.
There was a weakening Australian dollar against the US dollar which ‘makes our shares look cheap internationally’ as well as an upswing in commodity prices. Foreign investors are renewing their interest.
In addition, investors may have been recognising that miners had reduced debt, reduced capex, and had boosted shareholder returns.
What’s next for Rio Tinto?
While the Royal Commission into banking continues, the mining sector is enjoying a refreshing respite from negative media.
Citi Analyst Clarke Wilkins has described mining ‘on a relative basis’ as ‘quite attractive’ and ‘the destination for funds’.
According to Glyn Lawcock, this is a sharp contrast to mining’s state of affairs back in 2011, of ‘rampant investment’ by the industry, falling prices and over-supply.
But it’s clear that times are changing, and investors are beginning to recognise the industry’s revival.
Can the good times continue for Rio Tinto?
Only time will tell. But judging from the broad changes sweeping over the mining sector at large, it seems likely that some wonderful possibility lies ahead.
For Money Morning
PS: As the Aussie mining industry shows increasing signs of making a comeback, Money Morning resources analyst Jason Stevenson argues that the best gains won’t be made in the big household names like Rio Tinto. He believes the greatest potential is in lesser-known, more speculative resource stocks. That’s why he’s prepared a free new special report, ‘The Top 10 Mining Stocks in Australia for 2018’. You can download your free copy of that report here.