The S&P / ASX 200 Index (index: ^AXJO) (ASX: XJO) is set to post a good start to the trading week, up more than 0.5% in late afternoon trading. But that's nothing compared to Rio Tinto Limited's (ASX: RIO) gain. The giant iron ore miner has surged more than 2.5% to clear the $60 mark.
Here are three reasons why Rio's shares are soaring…
1) The iron ore price gained 1.5% to US$92.10 on Friday, while the LME 3-month copper price gained 1.4% to US$6,820 a tonne. Rio generates around 90% of profits from iron ore, and another 7% of total profit from copper.
2) Rio's shares have been sold off this year, losing 12% since the beginning of January. Some investors may have viewed the recent price as cheap and an opportunity to get set in the world's second-largest iron ore miner, with one of the lowest production costs globally.
3) An indicator of Chinese factory activity, the HSBC Flash PMI came in at 50.8 in June, up from 49.4 in May and higher than economists had expected. China is Rio's largest customer, and increased productivity could indicate that demand for the company's raw commodities is going to increase in the near future.
Rio isn't the only stock showing strong gains today, BHP Billiton Limited (ASX: BHP) is also up 1.4%, Fortescue Metals Group Limited (ASX: FMG) has climbed 3.9% while iron ore junior BC Iron Limited (ASX: BCI) is up over 5% – all likely on the back of the iron ore price move and China data.
While RIO is not on our watchlist, there are three other resources stocks that could reward shareholders over the long term…
