The resources sector has been on form this year and has played a key role in driving the ASX 200 to within a whisker of its record high.
The good news is that analysts still believe there are plenty of gains ahead for shares in the sector.
For example, the two ASX mining shares listed below have recently been tipped as buys with material upside. Here's what you need to know about them:
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Iluka Resources Limited (ASX: ILU)
The first ASX 200 mining share that could be in the buy zone is Iluka. It is a mineral sands and rare earths producer with a number of quality operations across South Australia, Western Australia, and Sierra Leone. Though, the company is in the process of demerging the latter into a separate ASX listing.
Goldman Sachs is very positive on the company. The broker highlights its attractive valuation, the favourable outlook for mineral sands, and its exposure to rare earths. Goldman explained:
"We are Buy rated on mineral sands/rare earth producer ILU (on 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.
ILU recently announced the long awaited approval of the 17.5ktpa TREO (4ktpa NdPr) Eneabba Phase 3 Rare Earth Refinery (ERER) in Western Australia and a compelling risk sharing arrangement with the Australian Government, including a A$1.25bn non-recourse loan, to be paid back by 2032. Construction of the refinery will commence in 2H 2022, with first production expected in 2025. We value the ERER at ~A$3.2bn (A$7.5/sh) with a calculated IRR of c.30%, assuming feed from ILU's Wimmera project in Victoria from 2026."
The broker currently has a conviction buy rating and $14.00 price target on Iluka's shares.
Mineral Resources Limited (ASX: MIN)
Another ASX 200 mining share that could be in the buy zone is Mineral Resources. Is it a mining and mining services company with a focus on two in-demand commodities – iron ore and lithium.
The team at Citi is very positive on the company, particularly given its recent decision to increase lithium production in response to the insatiable demand for the battery making ingredient. Citi commented:
"MIN plans to double spodumene processing capacity (mixed 6% concentrate, and a lower grade product) at Mount Marion lithium mine (MIN 50%) to 900 ktpa by the end of CY22, after capital investment of $120m. At Wodgina (MIN 40%), the production restart of processing Train 1 is ahead of schedule, now expected in May 2022. And processing Train 2 is now scheduled to restart in July 2022.
MIN's expansion and restart plans are in response to strong market demand for lithium products. MIN's share of the expanded equivalent 6% spodumene concentrate (650 ktpa) equals around 100 ktpa of LCE (by lithium units). For context, Allkem Ltd's (AKE) targeted FY22 production capacity is 50 ktpa LCE (on a 100%), and FY26 capacity is 145-to-158 ktpa LCE."
Citi has a buy rating and $76.00 price target on Mineral Resources' shares.
