ASX mining shares can be very successful investments if we buy them at the right price. But, they can also be unpredictable, volatile and cyclical.
The fund manager L1 Capital has outlined two ASX mining shares that could be compelling opportunities today despite the recent strength of their share prices.
The two businesses I'm going to cover give exposure to iron ore, lithium and gold. Let's take a look at what makes them so appealing…
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Westgold Resources Ltd (ASX: WGX)
ASX gold shares have gone on a strong run in recent times following the gold price moving sharply higher.
L1 said gold's significant outperformance continues to be driven by a combination of large and growing public fiscal deficits, a devaluation of the US dollar, emerging market central bank accumulation and now a global rate-cutting cycle.
In October, Westgold released a 3-year outlook for the business that was well received by the market. The Westgold share price has risen by 30% in October to date.
The fund manager said that the ASX mining share's outlook demonstrated its transformation into a producer of material scale, with FY25 production of around 325,000 ounces expected to grow towards 470,000 ounces in FY28.
L1 concluded its thoughts on the business with the following:
We believe there remains significant medium-term upside to grow this production number further. Importantly, Westgold is upgrading the quality of its portfolio by focusing on scalable operations, enabled through investment in exploration. We expect this to result in a more efficient cost structure over time, and ultimately, a significantly stronger earnings profile.
Mineral Resources Ltd (ASX: MIN)
Mineral Resources is an ASX mining share that's involved in both iron ore mining and lithium mining.
L1 noted that the company is benefiting from a resurgent lithium price, which is recovering from multi-year lows following the closure of a major Chinese operating company owned by CATL and speculation around further Chinese supply cuts.
The company recently announced that the Onslow iron ore project road upgrades had been completed, removing the final bottleneck for the project running at full capacity.
Before the road was fully complete, the project had exceeded the targeted nameplate iron ore shipments (3.2mt shipped in August compared to a nameplate of 2.9mt monthly).
At a full run-rate and US$100 per tonne iron ore price, the company expects Onslow to generate around $1.3 billion in operating profit (EBITDA), materially contributing to de-leveraging the balance sheet.
On top of the above, the ASX mining share offered and priced a US$700 million 2031 bond, replacing those of equal amount that matured in 2027, materially improving near-term liquidity.
L1 also noted the business is making significant progress on a board and governance reset with the appointment of several new non-executive directors, following Malcolm Bundey's commencement in the role of chair at the start of July. The fund manager concluded its view on the ASX mining share with the following:
We continue to believe that each of the company's core segments should see material improvement from current levels over the medium term and we believe the risk-reward at the current share price still remains compelling.
