The Rio Tinto Limited (ASX: RIO) share price has been marching higher since the beginning of the year.
At the time of writing, the mining giant's shares are 1.94% higher to $122.88. This is a sharp recovery from when its shares were trading around the $88 mark in early November.
In 2022, Rio Tinto shares have gained more than 22%.
What's driving Rio Tinto shares higher?
There are a few factors as to why the Rio Tinto share price is trading in positive territory this year.
Firstly, the accent of iron ore prices is providing a strong support base for the company's margins thus far in FY22. This is predominately being driven by supply constraints caused by the COVID-19 outbreak in China.
Regarded as a key commodity in Rio Tinto's portfolio, this is particularly important given a majority of the company's revenues come from the steelmaking ingredient.
In the financial year ending 31 December 2021, iron ore accounted for 62% of the total group sales revenue.
In addition, the S&P/ASX 200 Resources Index (ASX: XJR) has also pushed ahead, gaining almost 21% in 2022. The sector represents 48 of the largest companies in the S&P/ASX 200 Index (ASX: XJO) in the energy, metals, and mining industry.
A positive shift in investor sentiment toward the index has propelled Rio Tinto shares higher.
Can Rio Tinto shares reach a record high in 2022?
If the Rio Tinto share price is to break its all-time high in 2022, iron ore prices will need to accelerate further.
Rio Tinto shares broke a record high of $137.33 in August 2021.
Iron ore prices reaching levels above US$200 per tonne will, indeed, translate to bumper profit for the world's largest iron ore miner.
In its full-year results, Rio Tino revealed iron ore shipments of 321.6 million tonnes, down 3% on FY20. This was impacted by above-average rainfall in the first six months of 2021.
The 2021 monthly average Platts index for 62% iron fines converted to an FOB [free on board] basis was 45% higher on average compared with 2020.
Rio Tinto attained average revenue of US$143.8 per dry metric tonne.
Following the company's FY21 financial scorecard, analysts at Goldman Sachs raised their outlook on Rio Tinto shares by 2.1% to $131.50.
In addition, the team at Morgan Stanley lifted its 12-month price target by 7% to $130.50.
It appears that each of the brokers believes that Rio Tinto shares are slightly undervalued for the time being. The above assessment reflects a potential upside of around 7%.
However, it's worth noting that the above price target is under the record price Rio Tinto shares achieved mid-last year.
Rio Tinto share price summary
Adding to today's gain, the Rio Tinto share price has surged 22.65% in 2022.
However, when looking across the past year, the mining outfit's shares are up around 1.6%.
After reaching an all-time high of $137.33 in August 2021, investors heavily sold off the company's shares.
Rio Tinto hit a 52-week low of $87.28 in November before quickly rebounding higher of late.
The company has a price-to-earnings (P/E) ratio of 6.93 and commands a market capitalisation of roughly $45.5 billion.
