2 ASX mining shares given conviction buy ratings

One area of the market that has been tipped to perform strongly this year is the mining sector. This is …

| More on:
hand selecting happy face from choice of happy, sad and neutral faces signifying best ASX shares

Image source: Getty Images

One area of the market that has been tipped to perform strongly this year is the mining sector. This is thanks to the positive commodity price backdrop and favourable valuations, as mentioned here.

In light of this, if you’re looking for exposure to the mining sector in 2022, then you may want to check out the two shares listed below. Both of these ASX mining shares have been given conviction buy ratings by the team at Goldman Sachs. Here’s why it is bullish:

Iluka Resources Limited (ASX: ILU)

The first mining share to consider is this mineral sands company. Goldman believes it could be a top option for investors due to the favourable outlook for mineral sands and its exposure to rare earths.

The broker explained: “We are Buy rated on mineral sands/rare earth producer ILU and add the company to our Conviction List (CL) on attractive valuation and compelling Zircon and TiO2 price upside and Rare Earth growth potential. ILU is trading at a >50% discount to RE peers and >10% discount to min sands/pigment peers on an EV/EBITDA basis. Iluka recently released a larger-than-expected maiden resource on the Wimmera rare earth (RE) & zircon deposits in Victoria containing over c.1Mt of rare earth oxides (REO) and 10.6Mt of zircon. The Wimmera deposit is an important part of ILU’s rare earth growth strategy.”

Goldman has a conviction buy rating and $12.40 price target on Iluka’s shares.

South32 Ltd (ASX: S32)

Another ASX mining share that Goldman has on its conviction list is South32. The broker likes this diversified miner due to its attractive valuation, strong free cash flow outlook, capital return potential, and positive project news flow.

Goldman explained: “We are Buy rated on S32.AX (on Conviction List) with strong FCF (19% base case for FY22), exposure to base metals (aluminium & alumina c. 50% of FY22 EBITDA; we are bullish aluminium on a multi-year view, zinc/nickel c. 20%), and earnings upside from the Sierra Gorda copper acquisition (c. 15% upside to our EBITDA; not in our numbers pending deal completion; expected 1Q22).”

The broker currently has a conviction buy rating and $4.70 price target on its shares.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Resources Shares

a man clasps his hand to his forehead as he looks down at his phone and grimaces with a pained expression on his face as he watches the IAG share price continue to fall
Resources Shares

Why is the Sayona Mining share price crashing 21% today?

Sayona Mining's shares are crashing on Monday. Here's why...

Read more »

asx share price increase represented by golden dollar sign rocketing out from white domes of lithium
Share Gainers

Tiny ASX gold share soars 23% on ‘transformational’ lithium prospects

Ragusa Minerals hopes to create a 'supergroup' project area in the NT similar to neighbouring Core Lithium.

Read more »

happy looking men working at a mine, indicating a share price rise for ASX resource shares
Resources Shares

How are ASX 200 mining shares responding to the election outcome?

With a new government in power, how are some of the ASX's largest shares reacting?

Read more »

Happy woman miner with her thumb up signalling Wyloo's commitment to back IGO's takeover of Western Areas nickel
Broker Notes

Why the IGO share price is rallying on Monday

Shares in the Western Australian miner are up again in early Monday trading.

Read more »

Two miners examine things they have taken out the ground.
Broker Notes

Down 15% since early March, is the Rio Tinto share price an ASX mining buy?

Attention 'buy the dip' investors...

Read more »

fingers walking up piles of coins towards bag of cash signifying asx dividend shares
Resources Shares

3 reasons why I plan to own my Fortescue shares for the long term

Fortescue is one of the larger positions in my portfolio. I like it for a few different reasons.

Read more »

Happy woman miner with her thumb up signalling Wyloo's commitment to back IGO's takeover of Western Areas nickel
Resources Shares

3 ASX mining shares that went gangbusters on Friday

These ASX resource stocks ended the week on notable highs.

Read more »

man jumping along increasing bar graph signifying jump in alumina share price
Resources Shares

Critical Resources share price jumps 6% on ‘further significant’ lithium find

It has been a fantastic week for Critical Resources shareholders.

Read more »