ASX materials stocks roared back to life yesterday as investors gobbled up shares on the back of positive negotiations in the Middle East.
The S&P/ASX 200 Materials Index (ASX: XMJ) rose 4.4% yesterday. Investors will be cautiously optimistic the rally can continue.
It appears Morgans is optimistic about the sector bouncing back, as it has initiated coverage on two ASX materials stocks with buy recommendations.
Here's what the broker had to say.
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Many Peaks Minerals Ltd (ASX: MPK)
Many Peaks Minerals is an Australia-based mineral exploration company. The company focuses on advancing gold and copper projects and other mineral sector assets in West Africa.
Morgans has initiated coverage on the ASX materials stock with a speculative buy recommendation.
The broker said the company is exploring the Ferke Gold Project (76.5%) in Cote d'Ivoire.
Our modelling suggests the Ouarigue South system has already exceeded 1Moz Au ahead of an imminent Maiden MRE.
At Ferke, our thesis is driven by geometry and early-stage economics rather than in-situ ounces.
Broad widths deliver favourable geometry supporting low strip ratios and unit costs, meaning scale doesn't need to be excessive to deliver robust economics. Our mining scenario outlines an initial 7.5-year operation producing ~110kozpa at an AISC of ~A$2,525/oz, with underground and regional potential providing a clear runway for mine life extensions and project scale growth.
Morgans has placed a price target of $1.92 on the ASX materials stock assuming an effective 76.5% ownership, including government free carry.
From yesterday's closing price of $0.98, this indicates an upside potential of approximately 96%.
Deterra Royalties Ltd (ASX: DRR)
This ASX materials stock manages a portfolio of mining royalty assets.
Morgans has just initiated coverage on the company with a buy rating and $4.85 target.
DRR offers a rare capital-light exposure to tier-1 iron ore via a 1.232% Gross Revenue Royalty over BHP's Mining Area C (a 45yr+ mine life asset with near-zero operating risk for the royalty holder) which delivers a 93% EBITDA margin.
The Trident acquisition (Sep-24) added Thacker Pass, a 1.05% Gross Royalty Revenue (GRR) over a global-scale lithium deposit (85yr mine life, General Motors-backed).
This provides genuine battery metals optionality worth A$0.40/share risked, diversifying the revenue base beyond iron ore. DRR trades at 9.7x FY27F EV/EBITDA, a 32-46% discount to global royalty peers (Franco-Nevada 19x, Wheaton 18x) that we believe is excessive given robust earnings platform, path to net cash, and emerging capital return optionality.
From yesterday's closing price of $4.17, this price target indicates a potential upside of approximately 16%.
