The Rio Tinto Limited (ASX: RIO) share price was out of form on Wednesday.
The mining giant's shares ended the day slightly lower at $94.01.
This appears to have been driven by a mixed reaction from analysts to the company's third quarter update yesterday.
One broker that is sticking with the company is Goldman Sachs.
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What did Goldman say about the Rio Tinto share price?
According to a note, Goldman was relatively pleased with Rio Tinto's performance during the third quarter.
And while some may now doubt that the company can achieve its iron ore shipments guidance for FY 2022 after that soft quarter, Goldman believes it is possible. It commented:
RIO expects Pilbara shipments to be at the lower end of the 320-335Mt guidance range (GSe already there at 322Mt), implying ~86Mt of shipments in 4Q, which is achievable in our view with the ongoing ramp-up of the ~45Mtpa Gudai-Darri mine.
Goldman also highlights that things are finally progressing for the Rhodes Ridge joint venture. If all goes to plan, the broker feels it could be a significant contributor to its Pilbara operations. It said:
After a decade long wait, RIO (50%) have agreed with Wright Prospecting (50%) to modernise the JV covering the 6.7Bt, ~62% Fe Rhodes Ridge deposit in the East Pilbara […] We think the development of Rhodes Ridge has the potential to be significant for RIO's Pilbara business as it could lift system capacity, product grades and FCF/t, but will lower RIO's equity tonnes.
Are its shares a buy?
The note reveals that Goldman has retained its buy rating on the miner's shares with a trimmed price target of $112.90.
This implies potential upside of 20% for investors over the next 12 months. In addition, the broker is forecasting a fully franked 7.2% dividend yield in FY 2023, bringing the total potential return beyond 27%.
Goldman remains bullish due to its "compelling valuation" at 0.82x NAV and 4.2x FY 2023 EBITDA. The broker also highlights its strong free cash flow generation and big dividend yield as other reasons to buy.
