Rio Tinto Ltd (ASX: RIO) shares are having a good session on Thursday.
At the time of writing, the mining giant's shares are up 1.2% to $128.02.
This compares favourably to a 0.2% decline by the ASX 200 index today.
Why are Rio Tinto shares climbing?
Today's gain appears to have been driven by a relatively positive reaction to its investor day event from the broker community.
For example, Morgan Stanley has responded by reaffirming its overweight rating and $134.50 price target. This implies potential upside of just over 5% for investors from current levels.
In addition, the broker expects a fully franked 5.5% dividend yield in FY 2024. This boosts the total potential return to 10.5%.
Elsewhere the team at Goldman Sachs has responded positively. It has retained its buy rating with a $137.70 price target.
This suggests an upside of 7.5% for investors over the next 12 months. And with a 5% dividend yield expected next year, this would mean a 12.5% return for investors if Goldman is on the money with its recommendation.
Commenting on the company's update on its iron ore plans, the broker said:
Project scope, timing and economics were provided for Simandou which were all broadly in-line with GSe; RIO's share of production expected to be 27Mtpa (60Mtpa 100% basis from the Southern Block 3 tenement), RIO's share of capex US$6.2bn vs. GSe US$6.8bn (nominal est, US$5.7bn remaining to be spent from 1 Jan 2024), first iron ore production in late 2025 but first ore on ship 30-42m post signing of agreements. Therefore, first iron ore on boat is likely 2H26, which is broadly in-line with our model. RIO estimates at IRR in the low double digits (11-13% post tax, real basis vs. GSe ~12%). Operating costs, royalties, tax rates provided were also broadly in-line with GSe. We value RIO's 45% share of Simandou at ~US$5.5bn or ~A$5/sh.
In light of this, Goldman remains positive on the mining giant and sees value in Rio Tinto's shares due to its "compelling relative valuation" and "attractive FCF and dividend yield."
