ASX mining shares are highly popular investments on the Australian share market. The likes of BHP Group Ltd (ASX: BHP), Fortescue Ltd (ASX: FMG) and Rio Tinto Ltd (ASX: RIO) can be found in many investors' portfolios.
But I'm not a habitual buyer of ASX mining shares myself. Some miners are great companies, to be sure. But it's always been the cyclical nature of miners that has turned me away from this sector. With the inevitable boom and bust of the resources markets, I think it's difficult for these companies to effectively compound their earnings over long periods of time, thus making them inferior investments.
Saying all that, I do think there's a significant buying opportunity if one buys the right mining stock at the right point in the commodity cycle. Everyone tends to love miners when prices are high, and the dividends are flowing, but no one wants to touch them when the tables turn.
But with a cyclical share, the best time to buy is often when everyone is selling. With the recent drop in commodity prices, it might be a good time to start thinking about this very concept. So today, let's discuss three ASX mining shares I'd buy in a commodity bust.
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3 ASX mining shares to buy in a commodity bust
The largest mining share on the ASX
First up is none other than the Big Australian itself, the aforementioned BHP. BHP is unquestionably one of the highest-calibre miners in the world. Its iron ore operations are massive, with major projects across Australia and the Americas. BHP is also one of the world's lowest-cost producers of iron ore, meaning that even if prices go off a cliff, BHP would not find itself in financial strife.
But the reason I like BHP compared to some of its peers is its diversified earnings base. Not only does this ASX mining share produce iron ore, but it also has significant operations in copper, metallurgical coal, potash and nickel.
For this diversified portfolio of critical minerals, I would be happy to buy BHP if its shares collapsed in a commodity bust.
South32 Ltd (ASX: S32)
I would also be happy to buy stock in BHP's old stablemate, South32. BHP and South32 parted ways back in 2015, as BHP was trying to slim down its operations at the time.
Today, South32 is an even more diversified miner than BHP, with global operations covering nickel, aluminium, copper, zinc, manganese, silver and lead.
It's usually quite difficult to find an ASX mining share with that kind of diversity. But South32 is a rare exception. With investments in almost every major industrial metal, I would also be happy to add South32 shares to any portfolio if other investors are running for the doors.
Newmont Corporation (ASX: NEM)
Finally, let's talk about a gold miner in Newmont. Newmont is a relative newcomer to the ASX, having joined our markets just last year. That was a result of Newmont's acquisition of the old Newcrest Mining, of course. Newcrest did claim to be the largest gold miner on the ASX, but that honour now goes to Newmont.
I think of gold miners differently from other ASX mining shares. That's because the gold market is not economically driven, as are the markets for iron ore, copper, and other base metals. Instead, the vast majority of gold purchased is either for jewellery or for investment purposes.
As such, I'm happy to own a gold miner with minimal diversification.
So why Newmont? Well, it is also one of the largest miners in the world, with a huge portfolio of high-grade mines. Again, Newmont's cost of extracting its gold is among the lowest in its sector. This means, in my view, that Newmont will survive when gold prices are low and thrive when they are high.
