The lithium and iron ore ASX shares that I like right now: expert

Mining has done all the heavy lifting for the Australian market this year, and could continue to do so.

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The world is in turmoil, but the Australian share market might be better placed to navigate through the rough times than most.

That's the opinion of T Rowe Price Group Inc (NASDAQ: TROW) head of Australian equities Randal Jenneke, who said ASX shares look "cheap" right now.

"As a result, global money managers have been directing more money toward the Australian stock market," he said.

"Australia's cheapness partly reflects its composition and the greater share of value sectors in the index."

One of the dominant sectors that shape the "composition" of the ASX is mining.

Even after the market panic in the past week, the S&P/ASX 300 Metals & Mining (ASX: XMM) is up 0.4% for the year to date.

So which are the mining shares Jenneke's team favours at the moment?

'Globally significant, long-life, low-cost lithium asset'

The T Rowe Price team is a believer in the carbon reduction theme, and how particular minerals may see increased demand because of it.

"We like certain metals including lithium and copper as electric vehicle plays," said Jenneke.

"For example, Allkem Ltd (ASX: AKE) possesses a globally significant, long-life, low-cost lithium asset that is leveraged to the growing demand for lithium-ion battery technology and energy storage."

Allkem stocks, like other ASX lithium shares, have really cooled off in recent weeks. They have lost about a quarter of value this month.

Shaw and Partners portfolio manager James Gerrish said earlier this month that lithium is hard to substitute in a modern battery.

"It is a light metal but is able to store large amounts of energy and is an excellent conductor of electricity."

Cashing in on Chinese real estate revival

The other mineral that Jenneke thinks will enjoy hot demand is iron ore.

And among its producers, his team favours ASX 200 share Rio Tinto Limited (ASX: RIO).

"We think Rio will likely be supported by improved stability in the Chinese property market and significant additional stimulus in the form of infrastructure investment."

Analysts at Macquarie Group Ltd (ASX: MQG) are also fans of Rio Tinto shares.

"There are expectations that Rio Tinto will pay a grossed-up dividend yield of 15.8% in FY22 and 10.9% in FY23," reported the Motley Fool's Tristan Harrison earlier this week.

The Macquarie team has reportedly placed a stock price target of $135 for Rio, which is a 26% premium on the Friday closing price of $107.10.

Motley Fool contributor Tony Yoo has positions in Macquarie Group Limited. 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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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