Why did Rio Tinto shares smash the market in April?

Why were investors buying this mining giant's shares last month?

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Rio Tinto Ltd (ASX: RIO) shares certainly were on form in April.

Over the month, the mining giant's shares smashed the market with a gain of 7%.

As a comparison, the ASX 200 index recorded a disappointing 3% decline over the same period.

Why did Rio Tinto shares outperform?

While the company did release its first quarter update last month, its shares had already surged higher before that announcement.

This seems to have been driven partly by rising copper prices and a number of bullish broker notes.

In respect to the latter, Citi, Goldman Sachs, Morgan Stanley, and UBS all picked out the miner as the one to buy ahead of rival BHP Group Ltd (ASX: BHP).

Goldman Sachs commented:

We continue to rate RIO a Buy based on: Compelling relative valuation: trading at c. ~0.9x NAV (A$146.5/sh) vs. peers (BHP ~0.95x NAV and FMG ~1.3x NAV) and c. ~5.5x NTM EBITDA at GSe base case, below the historical average of ~6-7x.

Goldman has a buy rating and $138.90 price target on Rio Tinto's shares.

What about its quarterly update?

Rio Tinto's update had a mixed reaction on the day, but overall went down well with analysts and the market. Particularly given that management reaffirmed all FY 2024 guidance.

The miner's iron ore production fell 11% quarter on quarter to 77.9Mt. This reflects planned ore depletion, predominantly at Yandicoogina, which was partially offset by productivity gains across other operations. This led to Rio Tinto's iron ore shipments reducing 10% quarter on quarter to 78Mt.

Whereas the company's copper production fell 3% compared to the fourth quarter to 156k. This was driven largely by Kennecott mined copper production.

Finally, Rio Tinto's aluminium production fell 2% quarter on quarter to 826kt and bauxite production was down 11% to 13.4Mt.

In other news

Rio Tinto is holding its annual general meeting this morning.

The miner's chair, Dominic Barton, spoke positively about the future and the transition to renewable energy. He said:

I believe we are more than ready for this challenge – it's in the company's DNA. We are fortunate to have an incredible exploration team with a wealth of expertise and data, supported by one of the largest multi-commodity exploration budgets – a budget that has been consistent throughout the cycle over the last 15 years. In fact, we have one of the best exploration pipelines in years, totalling more than 100 projects across our commodities of interest.

This positive sentiment was echoed by its CEO, Jakob Stausholm. He commented:

Rio Tinto is at the heart of the energy transition and therefore facing an opportunity-rich world. We are still seeing powerful traditional drivers of long-term demand, and our core markets are growing.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 positions in and has recommended Goldman Sachs Group. 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 Scott Phillips.

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