November was a great month for the S&P/ASX 200 Index (ASX: XJO) and most ASX 200 shares by extension. After an exceptionally rough September and October, last month saw the ASX 200 turn a corner, putting on a robust 4.5%. But let's talk about Rio Tinto Limited (ASX: RIO) shares.
Like most ASX 200 shares, mining giant Rio Tinto shared the spoils last month. More than most, in fact.
The Rio Tinto share price started in November at $117.58. But by last Thursday, the iron ore heavyweight closed up at $125.04 each. That's a pleasing gain of 6.34% for the month.
So what went so right for Rio shares over November that saw this iron ore miner outperform the broader market so convincingly?
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Why did investors enjoy a 6.3% return from Rio Tinto shares last month?
Well, it's hard to say, unfortunately.
It was actually a very quiet month for Rio Tinto when it came to official news and announcements. We only got one significant development from the company on that front. That was the court-approved settlement that we covered at the time.
On 22 November, Rio announced that it had reached a settlement with the US Securities and Exchange Commission (SEC) in relation to a case involving Rio's disclosure of the impairment of Rio Tinto Coal Mozambique.
As we looked at, Rio agreed to pay a US$28 million fine to the SEC, despite neither "admitting to or denying the SEC's allegations related to its books". Rio Tinto Coal Mozambique was acquired by Rio in 2011 and divested in 2014. All parties now consider the case closed.
Despite this hefty fine, Rio shares rose on the day this settlement was announced. So perhaps investors were just relieved it's all over.
But apart from that, there was nothing major out of the company last month. However, Rio's iron ore mining peers also had a great November on the whole. Take the BHP Group Ltd (ASX: BHP) share price. It enjoyed a 4% boost over the month just gone. Fortescue Metals Group Limited (ASX: FMG) shares did even better again, rising by more than 12%.
This indicates to us that something was lifting the entire sector, just as a rising sea lifts all boats.
Thanks to the iron ore price?
In this case, we can probably thank the iron ore price itself. Indeed, looking at data from Business Insider, it looks like this is the case. Iron ore was reportedly asking just under US$119 a tonne at the start of November. But by the time the end of the month came around, that same tonne was going for more than US$130 a tonne.
That may not seem like a big difference. But a lift of almost 10% can have a disproportionate impact on the profits of iron ore miners like Rio Tinto. That's because Rio, along with all miners, has relatively fixed costs. So any rise in the underlying prices of commodities can boost profits exponentially.
This is probably why Rio shareholders have had such a lucrative month over November. Let's see what happens as we embark on December.
At the current Rio share price, this ASX 200 miner has a market capitalisation of $47.3 billion, with a dividend yield of 4.60%.
