The Rio Tinto Limited (ASX: RIO) share price has had a strong start to the week and finds itself up over 2.5% to $70.00 in morning trade.
This could be just the beginning of greater gains if one of Australia's leading brokers is to be believed.
According to a research note out of Deutsche Bank, its analysts have retained their outperform rating on its shares and increased their price target to $80.00.
Based on the current share price this implies a potential return in excess of 14% excluding dividends.
Deutsche has increased its price target on Rio Tinto following a review of commodity prices. While the broker feels the sector as a whole is looking fully valued, it sees value in Rio Tinto and believes that deficits in base metals will persist and support current prices.
Should you invest?
Iron ore prices have come under significant pressure in the last couple of weeks, but appear to have found support again.
The benchmark 62% fines increased 4.1% to US$62.53 a tonne on Friday, according to Metal Bulletin. Furthermore, the low grade 58% fines climbed 5% to US$37.05 a tonne.
If prices remain favourable it could arguably make Rio Tinto and Fortescue Metals Group Limited (ASX: FMG) good options for investors looking to gain exposure to the resources sector.
While I do like Rio Tinto, my first preference would be Fortescue due to the sharp decline in its share price in the last couple of months. I feel this gives it greater upside potential over the next 12 months.
