The Rio Tinto Limited (ASX: RIO) share price went up $25 over the past year, will it go up around another $25 to $125 during 2020?
The miner has been a strong performer thanks to the high prices of iron ore during 2019, which has supported big shareholder returns over FY19.
Interest rates have been driven lower in Australia by the Reserve Bank of Australia (RBA), which should push all valuations higher. We've seen some yield-focused shares like Wesfarmers Ltd (ASX: WES), Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) rise but I'm not sure if Rio Tinto has seen the same uplift despite its preference for big shareholder payouts.
At the moment Rio Tinto is trading at 13x FY20's estimated earnings, which doesn't seem expensive compared to many other businesses on the ASX. But think about it, $1 of earnings is worth $1 of earnings whether it comes from a miner or a technology company, it's just that the miner's earnings are much less predictable.
But perhaps commodity prices will hold up a bit better than analysts are expecting, maybe global demand will increase if the US and China can work out a trade deal to remove some (or all) of the tariffs between them.
Most of us should want Rio Tinto to be successful in 2020 and beyond, it generates a lot of tax revenue for Australia. But, I have no idea which way iron ore prices are going to go in 2020 – but more iron ore production is likely to come online with Vale getting closer to full production again.
Foolish takeaway
It's definitely possible that Rio Tinto's share price could rise to $125 during 2020 but I'd guess the share price will spend more of 2020 closer to $100 than $125.
