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Date : 08/10/2021

3 Best ASX Mining Stocks Analysed By Our Experts

Top 3 Best Performing Mining Stocks to Consider in 2021

October is often referred to as the “crash” month. Will history repeat for the ASX 200? Well, the great crashes of 1929, 1987 and 2007 all happened in October. Already, stock markets have looked nervous the past few weeks.

The ASX 200 has sunk by 5.5% since its mid-August peak. Although, we could anticipate this correction as the market has been nervous after not seeing any pullback since the COVID-19 crash in March 2020. We think that investors should not be too worried. Hence, September broke an 11-month winning streak for the ASX 200. Therefore, a correction is a healthy thing. Thus, it can help to readjust and recalibrate asset valuations that may have become unsustainably high. For investors, corrections can provide the opportunity to take advantage of discounted stocks.

At the moment of writing, the ASX 200 continues its rebound adding 0.26% to this week returns of 1.76%.

Our List of Top Mining Stocks in ASX

Iron ore prices have remained relatively flat considering China’s public holiday. Iron ore prices slightly edged higher by 0.02% to US$117 a tonne on the back of limited trading liquidity. But China’s most-traded iron ore futures contracts for January 2022 delivery came back surging on Friday, up 4.8% to US$117/t equivalent to the spot price. China has also announced some encouraging economic data. Thus, its services sector is growing since September.

An encouraging move for Chinese iron ore pricing and positive domestic economic data is likely fuelling buying activity from iron ore juniors through to majors like the BHP and RIO share price.

BHP Group (ASX: BHP)

BHP Group is arguably the most well-diversified mining and exploration company there is, and it is a part of every investor’s portfolio for different reasons – maybe for the stable dividends, or to decrease the overall volatility of the portfolio. It is also one of the best blue-chip stocks that trade on the ASX.

However, the BHP share price has come under significant pressure since last month. Although, on Friday, the mining giant’s shares jumped up by 3% to $37.74 per share.

For the last six months, the falling BHP shares were keeping the Australian market lower while investors could not avoid concerns about the troubled property giant Evergrande. The ASX has bucked a good lead from the US as investors look for confirmation that Evergrande paid a $US83.5 million interest payment on Thursday. Evergrande pledged it would. Although some investors say they are yet to see the evidence. The Chinese giant is struggling to pay about $418 billion in debts and investors fear a collapse could reverberate around the world.

Despite the recent event, BHP remains a solid play, especially for its lucrative dividend of US$ 3.01 per share representing a solid payout ratio of 89%. The record dividend was the result of operational excellence throughout the year. BHP exhibited solid performance that led to consistent free cash flow generation and an efficient margin of 64%.

Looking forward, BHP is also streamlining its business. Hence, we have seen Woodside Petroleum and BHP announcing their intention to enter a merger commitment to combine their respective oil and gas portfolios by an all-stock merger to create a global top ten independent energy company. This move from BHP will pave the way for the resource giant to move into the Potash business and further focus on developing a net-zero company.

Northern Star Resources (ASX: NST)

The Northern Star share price has leapt into the green since trade commenced this month and now trades at $9.22 apiece. NST has been crawling higher these past few days after hitting a low of $8.26 last week, but they have still marched lower from $10 back in July.

Gold miner, Northern Star is one of Australia’s leading ASX-listed precious metal producers. With a resource base located in the gold regions of Western Australia. NST is currently involved in the exploration, development, mining, and processing of gold deposits. The company also sell refined gold derived from the Jundee, Kundana, Kanowna Belle, Paulsens, and South Kalgoorlie operations.

Whilst there has been no market-sensitive information for the gold mining company, it is worth noting that the price of gold has popped higher since we started the month. After trending downwards lately, gold bottomed out at a low of US$1,723/oz on 30 September. As of today, gold is trading at US$1,755/oz.

The recent gain has certainly got investors’ attention and has pushed the ASX gold basket higher over these past few days.

If you want to play the gold rebound, do not look any further. Northern Star is an ASX resources share that is in a unique position, in that it is in the business of mining and processing gold deposits. As such, it must accept the spot and/or forward price of gold in the commodity markets and is considered a price taker. This means NST share price can fluctuate with the volatility in the underlying commodity markets.

The Northern Star share price has struggled this year to date and has missed its benchmarks completely.

It now trades 30% in the red since year-to-date. This is well behind the ASX 200 return of around 20% year-to-date. On Friday, NST closed 0.76% higher at $67.70 per share.

Rio Tinto (ASX: RIO)

RIO shares are now trading at $100.40, closing the Friday session up by a remarkable 4%. The Iron Ore giant share price is now trading around 7% below its pre-COVID level.

Even though the recent turmoil on the Iron Ore market, we believe RIO is a fundamentally solid commodities giant. Thus, the group reported consolidated sales revenue for 1HFY21 of US$33.1 billion. That was up 71% from the prior corresponding period. Cash flow also leapt to US$10.2 billion, up 262% year-on-year.

Moreover, Rio declared an interim dividend of $3.76 per share, fully franked. On top of that, we are pleased to see a special dividend of US$1.85 per share, also fully franked.

In spite of being affected by the Iron Ore recent volatility, you should know that RIO’s future is not dependent on Iron Ore alone. In fact, the group is diversifying its portfolio of export minerals.

 

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