The fund manager Wilson Asset Management (WAM) has recently identified some S&P/ASX 200 Index (ASX: XJO) mining shares that it owns (or owned) in one of its main portfolios.
WAM operates several listed investment companies (LICs). These include WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).
There's also one called WAM Leaders Ltd (ASX: WLE) that looks at the larger businesses on the ASX, often referred to as ASX blue-chip shares.
WAM says WAM Leaders actively invests in the highest quality Australian companies. So does WAM have a good reputation for picking stocks?
The WAM Leaders portfolio has delivered gross returns (before fees, expenses, and taxes) of 13.6% per annum since its inception in May 2016. This compares to the S&P/ASX 200 Accumulation Index average return of 7.2%.
With that in mind, here are some of WAM's ASX 200 mining share thoughts outlined in a recent monthly update.
Copper, aluminium and iron ore
During September, the WAM Leaders investment team visited Perth to meet with various mining company management teams and undertake site tours in the Pilbara region.
The team concluded that earnings outlooks "vary dramatically by commodity". It noted that gold, aluminium, and iron ore producers were "relatively downbeat" on pricing, given price declines over the last few months.
However, price aside, WAM said these ASX 200 mining shares "are performing well" operationally, labour challenges have "eased", diesel costs are down from recent highs, and balance sheets are "strong".
The fund manager "see opportunities" across the mining sector when considering relative valuations.
WAM sees upside "to both the fundamentals and valuations of base metals" like copper, aluminium, and iron ore for the rest of 2022.
Its largest positions in the sector are BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), South32 Ltd (ASX: S32), OZ Minerals Limited (ASX: OZL) and Newcrest Mining Ltd (ASX: NCM).
What about lithium?
At the same time, WAM Leaders said that ASX lithium shares expect pricing "to hold at elevated levels given the demand profile continues to accelerate beyond expectation while impending additional supply continues to be delayed."
The fund manager revealed anecdotal feedback that "supply is so tight that car manufacturers may soon be paying lump sums for the right to have offtake agreements".
So does that mean that ASX 200 lithium shares are opportunities? WAM said:
While fundamentals for lithium stocks are undoubtedly strong, valuations appear full.
