Shares in iron ore giant Rio Tinto Limited (ASX: RIO) have been climbing at a break-neck pace over the last year in tandem with a surprise rebound in the iron ore price.
Today the stock hit a 52-week high of $63.44 which is actually not too far off a five-year high just above $70 in another reminder as to just how optimistic investors are over a return to big dividend and profit growth over the course of financial year 2017.
In fact tomorrow morning Rio is due to release its fourth quarter operational results for 2016 in what will provide an insight for investors as to whether the recent share price rise is justified and perhaps has further to run thanks to production levels and the recent strength in commodity prices.
The company expects to ship between 325 million and 330 million tonnes of iron ore over 2016, with guidance for a small lift to between 330 million and 340 million tonnes over 2017. Rio has already more than doubled its basic earnings per share for the half year to June 30 2016 and given the iron ore price strength investors can expect a strong result when it reports in early February.
However, with iron ore prices surging it's likely that others like Fortescue Metals Group Limited (ASX: FMG), BHP Billiton Limited (ASX: BHP) and Brazilian operator Vale will move to bring more production on line. For that reason I would be inclined to avoid Rio Tinto shares, although that's not to say they won't receive more support over the short term.
