Goldman Sachs names 3 ASX 200 mining shares to buy today

Here are three mining shares that could be in the buy zone…

| More on:
Happy man in high vis vest and hard hat holds his arms up with fists clenched celebrating the rising Fortescue share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The mining sector has been a great place to invest this year. Thanks to rising commodity prices, mining shares have been charging higher while other areas of the market go backwards.

The good news is that it may not be too late to invest in the sector according to Goldman Sachs.

It has been looking at the resources sector again this week and has given its verdict on a number of shares. Here are three that Goldman rates as buys:

Rio Tinto Limited (ASX: RIO)

According to the note, Goldman Sachs has a buy rating and $136.40 price target on this mining giant’s shares. Its analysts like Rio Tinto due to its strong free cash flow generation and production growth potential.

It said: “We are Buy rated on RIO discounting a long run iron ore price of US$64/t (vs. GSe long run of US$70/t real) and trading on a FCF yield of 15% in 2022E (based on our US$129/t Fe forecast for 2022). We think RIO has had a challenging March Q in the Pilbara due to equipment and labour shortages impacting 90Mtpa of iron ore replacement project tie-ins, but we believe RIO will turn the corner and return to production growth in mid-2022 on higher iron ore and copper volumes.”

South32 Ltd (ASX: S32)

South32 shares could also be in the buy zone according to Goldman Sachs. Its analysts have a conviction buy rating and $5.80 price target on the miner’s shares. The broker likes South32 due to its base metal exposure, which it expects to underpin significant earnings and free cash flow.

Goldman said: “We are Buy rated on S32.AX (on CL) with strong FCF (17% base case for FY23), exposure to base metals (75% EBITDA; aluminium & alumina c. 50% of FY23 EBITDA, copper c.10 %, zinc/nickel c. 20%), and with 7%/3% Cu Eq production growth in FY22/FY23 driven by; ~30% or c. 280ktpa increase in aluminium production from the Alumar restart & c. 17% increase in Mozal stake, creep in nickel from Cerro Matoso and lead/zinc/silver from Cannington, and the Sierra Gorda copper acquisition.”

Whitehaven Coal Ltd (ASX: WHC)

A final ASX 200 mining share that has been named as a buy is this coal miner. Goldman believes Whitehaven Coal is well-placed to benefit from very strong coal prices. The broker has a buy rating and $5.30 price target on its shares.

Its analysts commented: “The already tight global coal markets have the potential to be further impacted with the Russia-Ukraine situation putting Russian coal exports at risk based on possible sanctions and “self-sanctioning” by European & Asian utilities and steel mills, in our view. […] We remain Buy rated on WHC trading at a ~15% discount to our NAV & c. 50/20% FCF yield in FY22/FY23. WHC is a compelling de-gearing and capital returns story in our view.”

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 group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.
Materials Shares

Why are these ASX 200 mining shares behind the eight ball today?

The ASX 200 is up, but not all shares are in the green.

Read more »

Upset man in hard hat puts hand over face after Armada Metals share price sinks
Resources Shares

Why did the BHP share price have such a lousy FY22?

Although it paid big dividends during FY22, BHP’s total returns were negative.

Read more »

Broker holding red flag in front of bear
Resources Shares

South32 crashes into bear market in June as recession fears bite

The miner and metals producer has had a challenging month.

Read more »

Three business people stand on platforms in the desert and look out through telescopes.
Resources Shares

What is the outlook for the Rio Tinto share price in July?

Can this be the start of a recovery for the mining giant?

Read more »

a man wearing a hard hat and a high visibility vest stands with his arms crossed in front of heavy equipment at a mine site.
Broker Notes

Should investors dig the Fortescue share price in July?

Fortescue is suffering in the sell-off. Will things get better in July?

Read more »

An engineer takes a break on a staircase and looks out over a huge open pit coal mine as the sun rises in the background
Resources Shares

Why did the Rio Tinto share price plunge 11% in June?

Let's analyse the month just gone by.

Read more »

Young boy with glasses in a suit sits at a chair and reads a newspaper.
Resources Shares

How did the Fortescue share price perform in June?

The iron ore producer's shares have been experiencing a rough patch of late.

Read more »

a sad looking engineer or miner wearing a high visibility jacket and a hard hat stands alone with his head bowed and hand to his forehead as he speaks on a mobile telephone out front of what appears to be an on site work shed.
Resources Shares

Why did the BHP share price take a tumble in June?

BHP shares dropped into the red in June. Here's what happened...

Read more »