10-baggers in 2023: Is it too late to buy these high-flying ASX mining shares?

After dishing out the kind of returns most investors can only dream of, should onlookers pause for thought?

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Rarely can someone say their investment is up more than tenfold in less than a year. Yet, that's exactly what can be said for shareholders who invested in these two ASX mining shares at the end of 2022.

To put the enormity of the performance into context, Liontown Resources Limited (ASX: LTR) is the best-performing company this year inside the S&P/ASX 200 Index (ASX: XJO). The aspiring lithium producer, which had been a takeover target until today, is up 126.8% in 2023.

That is a mouth-watering return, yet it pales in comparison to the other companies mentioned in this article. When the stock price gains of one company make the best-performing ASX 200 stock look like child's play, you know we're dealing with some obscene returns.

But, is it too late to hop on board these ASX mining shares?

Approach with caution

First, I want to make it clear how rare such a massive gain in a short time frame is.

There are more than 2,300 companies listed on the Australian Securities Exchange. Only two companies have delivered returns exceeding 900% (a 10-bagger) in 2023. That's less than 1% of the entire Australian share market.

To say this type of performance is anomalous would be an understatement.

Both Wildcat Resources Ltd (ASX: WC8) and Azure Minerals Ltd (ASX: AZS) are the 1% in the market this year, soaring 2,200% and 1,027%, respectively.

A modest investment of $1,000 in Wildcat Resources on 31 December 2022 would now be worth $22,000. Meanwhile, the same investment in Azure Minerals would be a tidy $10,270 sum today.

For those playing along, an investor would be looking at $1,012 before fees if invested in an ASX 200 exchange-traded fund (ETF).

I can feel the sudden surge in FOMO from here. This is my two cents before we assume that Wildcat Resources and Azure Minerals can only continue to go parabolic from here.

Both ASX mining shares have returned high-grade lithium assays in areas close to existing infrastructure. However, neither company is producing any meaningful revenue, as they are both in the exploration and development stages.

In my opinion, this means a lot more capital could still be needed to reach production.

Not to say it can't be done. However, a hefty amount of risk is still on the table before either company can prove their worth.

ASX mining shares I'd buy instead

High interest rates and a slowing economy make it all the more important for companies to be able to stand on their own two feet. That's why my money would be aimed at profitable ASX mining shares with established cash flows.

Right now, my top two picks are Lynas Rare Earths Ltd (ASX: LYC) and Deterra Royalties Ltd (ASX: DRR).

I believe Lynas is well-positioned as the capital-intensive Kalgoorlie processing facility nears completion.

Meanwhile, Deterra holds an attractive royalty over an iron ore mine operated by BHP Group Ltd (ASX: BHP). The real kicker with this ASX mining share is its negligible exposure to cost inflation due to the royalty business model.

Motley Fool contributor Mitchell Lawler has positions in Lynas Rare Earths. 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 Scott Phillips.

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