Top broker says Rio Tinto (ASX:RIO) share price is a buy and could rise 21%

Time to buy Rio Tinto shares?

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The Rio Tinto Limited (ASX: RIO) share price has started the week in a positive fashion.

In afternoon trade, the mining giant's shares are up 1% to $100.70.

Why is the Rio Tinto share price rising on Monday?

Today's gain by the Rio Tinto share price appears to have been driven by a positive reaction to its third quarter update from a leading broker.

According to a note out of Goldman Sachs, its analysts have retained their buy rating and trimmed their price target very slightly to $122.40.

Based on the current Rio Tinto share price, this implies potential upside of 21.5% for investors over the next 12 months before dividends.

And with Goldman forecasting a fully franked ~11% dividend yield in FY 2022, the potential total return stretches to over 32%.

What did the broker say?

Goldman notes that Rio Tinto had a tough quarter operationally. Nevertheless, its performance and downgraded guidance was at least in line with the broker's expectations.

It commented: "RIO had another tough quarter operationally and has downgraded 2021 guidance for multiple commodities including Pilbara iron ore shipments to 320-325Mt (from 325Mt) and mined copper production to 500kt (from 500-550kt). However, we note the new guidance is in-line with GSe and the Sep Q production was overall in-line or a touch better than GSe."

In light of this, its analysts remain positive on the Rio Tinto share price and see a lot of value in it at the current level. This is even after reducing long run iron ore price estimates to very low levels as part of the valuation process.

In addition, the broker expects Rio Tinto to generate strong free cash flow in the near term. This is expected to underpin dividend yields of 11% in FY 2022 and FY 2023.

Another reason Goldman is positive on the Rio Tinto share price is the company's copper production growth potential and its exposure to aluminium.

It said: "In addition to copper production growth, RIO has one of the highest margin, the lowest carbon emission aluminium businesses in the world, with over 2.2Mt of Ali production powered by hydro, and we think ELYSIS inert anode technology could be worth billions, in our view."

All in all, this could make Rio Tinto one to consider if you're looking for exposure to the mining sector.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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