Goldman Sachs: Rio Tinto shares are a buy today

Rio Tinto Limited (ASX: RIO) should benefit from a rising iron ore price.

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The Rio Tinto Limited (ASX: RIO) share price has been on a tear over 2019 to climb around 40% from $76.65 to $105.76, but it may have some gas left in the tank if the mining analysts at Goldman Sachs are on the money.

Goldmans' commodities team run the ruler over Rio Tinto and other mining businesses on May 27 and remain bullish on the outlook for iron ore prices.

In fact according to a May 27 note Goldmans is forecasting the iron ore price to average US$91, US$80, and US$72 a seaborne tonne over FY19-21 to respectively.

The upgrades to price estimates are the result of forecasts for stronger demand out of China combining with a supply shortage out of Brazil.

This is theoretically good news for the likes of Rio and others such as BHP Group Ltd (ASX: BHO) and Fortescue Metals Group Limited (ASX: FMG).

As a result of its improved forecasts Goldmans has put a $108.40 12-month share price target on Rio based on it trading at 6.5x EV/EBITDA.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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