ASX mining stocks have shown mixed performances this year. Whitehaven Coal Ltd (ASX: WHC) shares have been on a bumpy ride recently, shedding almost 20% of their value over the past month.
The stock peaked at $8.97 apiece on 9 July before levelling back to a longer-term range of $7.41 one month ago.
Since then, Whitehaven shares have slipped deeper into the red and currently fetch $6.05 apiece at the time of writing.
Despite hailing from the energy sector, the company is typically viewed as an ASX mining stock. And one fund manager is particularly bullish on its prospects.
In fact, Blackwattle Mid Cap Quality Fund has labelled Whitehaven "one of the highest quality mining companies on the ASX."
Let's take a closer look.
What's driving the downturn?
Whitehaven Coal's recent decline can be traced back to weakening metallurgical coal prices, largely influenced by a slowdown in China's property market. This has influenced many ASX mining stocks.
As steel consumption in China dips, so does the demand for metallurgical coal, a key ingredient in steelmaking.
According to Trading Economics, recent economic data also suggests a weakening in US factory activity for the "fifth consecutive month"
In August, Whitehaven shares fell 13%, making it the largest negative contributor to the Blackwattle Mid Cap Quality Fund's performance for the month. However, the fund says it's not all doom and gloom.
The company's FY24 numbers, alongside recent asset sales, have Blackwattle's portfolio managers constructive on the ASX mining stock.
WHC was the largest negative contributor to performance during the month. WHC fell 13% in August on weakening metallurgical coal prices. WHC is an Australian coal producer with thermal coal mines in NSW and recently acquired metallurgical coal mines in QLD.
WHC delivered a strong FY24 result, but more importantly announced the sell-down of 30% of the recently acquired Blackwater Coal mine at a significant premium to the original acquired price from BHP.
This sell-down places WHC in a net cash position, substantially reducing downside risk for the company.
Is Whitehaven a top ASX mining stock?
Despite the short-term headwinds, many analysts, including the Blackwattle team, view Whitehaven Coal as a high-quality ASX mining stock.
Blackwattle Mid Cap Quality Fund sees material long-term upside for Whitehaven, describing it as an "improving/enduring quality" business.
We continue to see material long-term upside for WHC as an 'improving / enduring quality' business and view WHC as one of the highest quality mining companies on the ASX, with strong financials and a capital disciplined management team.
We expect WHC to execute on numerous multiyear internal levers to maintain and improve the business quality including: cost reduction and production improvement in the acquired metallurgical coal mines, paydown of the deferred BHP acquisition payments, Vickery expansion & selldown, Daunia/Winchester South expansion & selldown and further disciplined capital management.
Meanwhile, analysts at JPMorgan echo the fund's sentiment. The firm recently upgraded Whitehaven to a buy rating with a price target of $9.20 apiece.
According to my colleague Bernd, JPMorgan sees a much stronger performance on the horizon for the ASX mining stock.
The stock is also rated a buy based on the consensus of analyst estimates, according to CommSec data. This rating is made up of 11 buys, four holds ratings, and zero brokers recommending to sell Whitehaven at this point.
Foolish takeaway
Although Whitehaven Coal may have hit a rough patch recently, experts say its long-term prospects still shine bright. The ASX mining stock is down around 10% in the past year.
