Analysts at Bell Potter have been busy finding ASX shares from several industries that they believe are best placed to have a strong 2021.
On this occasion, I’m going to look at the resources sector. Here are a couple of shares they rate highly:
Nickel Mines Ltd (ASX: NIC)
Nickel Mines is one of the broker’s top picks. This is based on its shares being cheap relative to its peers, its aggressive growth profile, and its pure nickel commodity exposure. Nickel is one of Bell Potter’s preferred base metals.
The broker has a buy rating and $1.60 price target on the company’s shares.
It commented: “During 2020 NIC’s NPI production lines operated at steady state production levels and all-in costs that beat our original forecasts and nameplate capacity, resulting in production attributable to NIC of ~34ktpa. The strong operational performance and rising nickel price enabled NIC to repay debt early and declare a maiden A2cps dividend (unfranked).”
The broker has also been pleased with its agreement with its partner, Shanghai Decent Investment, to acquire a 70% equity interest in the Angel Nickel Project in Indonesia.
“We view this as a positive development. The acquisition has been de-risked by the strong performance of NIC’s existing operations and screens as excellent value on a number of metrics. It should lift attributable production by +25ktpa (~74%), commissioning October 2022,” it concluded.
Regis Resources Limited (ASX: RRL)
This gold miner is another resources share that Bell Potter rates highly. It currently has a buy rating and $5.72 price target on the company’s shares.
It views Regis Resources as an attractive, reliable gold producer and notes that it has achieved consistent operating margins and is investing smartly.
Bell Potter commented: “RRL’s FY20 EBITDA margin of 52% is competitive with, or ahead of, key industry peers. RRL’s ongoing CAPEX is, in our view, an investment into attractive, capital efficient growth options that leverage off RRL’s existing infrastructure – an aspect of its operations that set it apart from many peers.”
The broker believes the market is overlooking the potential of its McPhillamys Project in NSW, which has made good progress through the permitting process and is well placed to advance to production.
It feels this should deliver material production growth in the future and could commence construction during 2021.
“In our view, the market attributes little value to this asset. RRL also remains one of the sector leaders for shareholder returns. Its FY20 dividend equates to a payout of $41m and a payout ratio of 43% of NPAT for a 2.9% fully franked yield (at dividend declaration),” it concluded.