ASX mining stock BHP Group Ltd (ASX: BHP) is a popular stock among investors, but some Australians may feel overexposed to BHP while still seeking investment opportunities in the resources sector.
BHP is one of the world's largest miners and has good exposure to commodities like iron ore and copper. However, a significant portion of its commodities are located and produced in Australia, so there isn't much geographic diversification.
The ASX has many different options, but smaller miners can have disadvantages, such as higher mining costs, due to their smaller economies of scale. So I'm going to talk about two large ASX mining shares that can offer more commodity and geographic diversification and be solid investments.
Rio Tinto Ltd (ASX: RIO)
Rio Tinto is also one of Australia's largest iron ore miners and can provide potential upside if there's a rebound in the iron ore price, like BHP does. In addition, it's one of the main partners in the huge Simandou iron ore project in Africa which could become very profitable.
The ASX mining stock also has a large and growing presence with copper. Its copper mine in Mongolia, Oyu Tolgoi, is one of the largest in the world. In the coming years, I think Rio Tinto's copper earnings can grow and become a larger proportion of the company's earnings. It has other copper projects around the world, which could also add to profitability in the coming years.
The miner is also involved in other commodities such as alumina, aluminium, lithium, bauxite and more.
According to the forecasts on Commsec, the current Rio Tinto share price is valued at 15x FY25's estimated earnings with a possible grossed-up (including franking credits) dividend yield of 5.5%.
South32 Ltd (ASX: S32)
Interestingly, South32 was divested out of BHP several years ago.
South32 offers much broader diversification than BHP across commodities and countries. It's currently involved in commodities including alumina, aluminium, copper, silver, lead, zinc, nickel, bauxite and manganese.
The ASX mining stock has a commodity presence in several countries, including the US, Colombia, Brazil, Chile, South Africa, Mozambique, and Australia.
South32 also has a number of development options and early-stage exploration projects in Australia, Ireland, the US, Namibia and Argentina.
I like the diversification offered by South32; it's not heavily exposed to just one commodity (like iron ore) and has plenty of opportunities to grow profit in the future.
If commodity prices bounce back with global economic growth, I think South32 shares would be a useful investment for investors interested in ASX mining stocks.
