Top broker Goldman Sachs has released a note detailing the ASX mining stocks investors should buy and how high their share prices could go in the new year.
Let's dig into the reasons behind these buy ratings.
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BHP Group Ltd (ASX: BHP)
The BHP share price is currently $47.84, up 0.08% for the day and down 3.1% over the past 12 months.
BHP digs up iron ore, copper, metallurgical coal, and nickel, and is developing a potash operation.
Goldman maintains its buy rating on BHP shares due to an attractive valuation and the broker's bullish view on copper and metallurgical coal.
The broker says:
We continue to believe that BHP's major opportunity is growing copper production in Chile at Escondida and Spence, and growing copper production and capturing synergies in South Australia between Olympic Dam and the previous OZL assets.
Goldman has a 12-month price target of $50.50 on the ASX's biggest mining stock.
Rio Tinto Ltd (ASX: RIO)
The Rio Tinto share price is $129.92, up 1.18% today and up 7.2% over the past 12 months.
Rio Tinto's key commodities are iron ore, copper, aluminium and lithium.
Goldman says this ASX mining stock is trading at a "compelling" share price versus its peers. The broker expects a 75% payout ratio on the upcoming final dividend due to the company's strong free cash flow.
The broker predicts "strong production growth in 2024-2025 of 5-6% CuEq driven by the ramp-up of the Oyu Tolgoi UG copper mine & a recovery at Escondida and Bingham."
Goldman has a 12-month price target of $141.80 on Rio Tinto shares.
Alumina Limited (ASX: AWC)
The Alumina share price is $1.10, down 3.1% on Friday and down 34% over the past 12 months.
Alumina isn't your typical ASX mining stock. It's a holding company that owns a 40% piece of the world's largest alumina miner, Alcoa World Alumina and Chemicals (AWAC), which is a division of Alcoa Corp.
Goldman just upgraded its rating on Alumina to buy. The broker says the price is attractive at about 0.65 times net asset value (NAV). It also describes AWAC's Pinjarra, Wagerup and Alumar refineries as "world-class".
Alumina was in the news this week after Alcoa announced full production curtailment at its Kwinana refinery in Western Australia.
Goldman said: "We believe that with the full curtailment of the loss-making Kwinana and San Ciprian refineries the company can restructure into a lower cost more profitable alumina business with average unit costs of US$120/t from 2H24 …".
The broker is forecasting a 20% increase in the alumina price this year to above US$370 per tonne. It says this will boost Alumina's margins and cash flow and create a case for dividends to be reinstated in 2025.
Goldman has a 12-month price target of $1.43 on this ASX mining stock.
Champion Iron Ltd (ASX: CIA)
The Champion Iron share price is $8.37, up 1.76% for the day and up 8.8% over the past 12 months.
Champion is a pure-play ASX iron ore mining share focused on high-grade ore.
Goldman says Champion Iron has a "compelling" valuation. It expects a doubling of production due to the ramp-up of Bloom Lake Phase 2.
The broker has a 12-month price target of $9.20 on this ASX iron ore mining stock.
Lynas Rare Earths Ltd (ASX: LYC)
The Lynas share price is $6.34, down 0.7% for the day and down 26% over the past 12 months.
Lynas digs up rare earths, which will be crucial in the green energy transition.
Goldman has Lynas shares on its Asia-Pacific conviction buy list. It says Lynas shares are undervalued, trading at just 0.8 times NAV (A$7.99 per share), with a strong balance sheet at net cash of $570 million.
The broker has a 12-month price target of $7.70 on this ASX rare earths share.
Coronado Global Resources Inc (ASX: CRN)
The Coronado share price is $1.76, down 0.17% today and down 11.9% over the past 12 months.
Coronado mines metallurgical coal.
Goldman says its buy rating is based on strong forecast free cash flow (FCF) and dividend yields in FY24 and FY25. The broker has a 12-month price target of $2 on this ASX coal mining stock.
South32 Ltd (ASX: S32)
The South32 share price is $3.56, up 0.14% on Friday and down 22% over the past 12 months.
South32 is a diversified ASX mining stock with exposure to aluminium, alumina, copper, zinc, manganese and metallurgical coal.
Goldman's commodities analysts are positive on base metals and expect "a positive inflection in price performance for copper and aluminium in particular".
While the broker is buy-rated on South32, it notes some risks:
S32: Upgrade to Buy on: (1) Attractive valuation trading at ~0.9xNAV; (Attractive valuation trading at ~0.9xNAV; (2) GS o bullish copper, aluminium, zinc and met coal leading to +50% EBITDA in FY25 and 10% FCF yield; (3) positive on growth pipeline as we have now incorporated the US$500mn (100% basis) 4th milling line expansion at Sierra Gorda copper in Chile into our base case which is expected to achieve FID in mid 2024.
We do see some near term risks with the potential write down of Cerro Matoso due to ongoing nickel product discounts, and an increase in capex for the Hermosa zinc/silver project in Feb (GSe US$2.2bn vs. PFS estimate of US$1.7bn).
Goldman has a 12-month price target of $3.80 on this ASX base metals mining stock.
Iluka Resources Limited (ASX: ILU)
The Iluka share price is currently $6.82, down 1.16% for the day and down 35% over the past 12 months.
Iluka mines mineral sands and rare earths. Goldman reckons the company has "compelling … growth potential" and plenty of money to fund its recently increased capex estimates.
The broker comments: "We also continue to think the recent drop in min sales volumes will be relatively short-lived compared to prior cycles due to an expected catch-up in China property completions and favourable medium term supply side fundamentals."
Goldman has a 12-month price target of $10.10 on this ASX mining stock.
