Today, the ASX 200 also reported some gains. The index added 37.20 points or 0.51% to $7,348.90 extending gains of 0.8% in the previous session. This was fuelled by easing long term bond yields boosted technology stocks, whilst investors proved optimistic on re-opening trades as NSW moves toward further easing of restrictions.
3 Top Performing ASX Iron Ore Stocks Of 2021
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.
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 2.8% to $38.86 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.
Rio Tinto (ASX: RIO)
The recent fall in the materials sector was affected by further slowdown risk in China steel production. What exactly drives the Iron Ore price? The Iron Ore prices crashed following weak Chinese demand. On top of that, China focuses on energy consumption and emissions targets. This involves China continuously cracks down on its industrial activity and reduce production aimed at lowering power usage.
Although these cuts might be just temporary until October 15, we believe that the demand for Iron Ore will only pick up in mid-December. Therefore, we could expect a rebound in the materials sector onward the month of December.
Furthermore, China’s second-largest property developer Evergrande has taken the spotlight this week following concerns that it may default on its US$300 billion debt burden. This headline could damage further commodities prices. hence, in terms of relevance to Iron Ore, the Chinese property and infrastructure sector account for 55% of its steel consumption.
Accordingly, the Rio Tinto share price is tanking on the back of a downward spiral in the price of iron ore. In fact, the spot price of iron ore has come down 47% since mid-July from highs of around US$222/Tonne and now trades at US$117.3/Tonne. However, since the beginning of this week, iron ore prices rebounded with yesterday’s impressive 10% soar.
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.
South32 (ASX: S32)
South32 is a global diversified metals and mining company headquartered in Perth. The company operates across five countries. It has a portfolio of quality assets that produce alumina, aluminium, coal, manganese, nickel, silver, lead and zinc.
South32 is a BHP spin-off and S32 shares were first listed on the ASX in 2015. S32’s strong ASX standing has been confirmed in the ensuing years. South 32 is now one of the largest listed companies on the ASX with a market capitalisation of $15.8 billion.
The S32 share price has been one of the most-watched by the community of investors this morning. Hence, we have seen an important inflow of volumes that sent the share up by 4.13% today. Actually, South32 has been in the spotlight as the company has just released an acquisition announcement.
The mining giant share price could be on the move today after S32 announced the acquisition of an additional 25% shareholding in Mozal Aluminium in Mozambique from MCA Metals. According to the release, South32 has exercised its pre-emptive rights to acquire the additional stake for US$250 million. This brings its ownership of the smelter up to 72.1%.
This acquisition increases S32 annualised equity share of aluminium production by 15% to 1,138kt. The release explained the transaction represents an acquisition multiple of 3.6x FY21 EBITDA. Hence, the firm has the necessary liquidity to proceed as it had a net cash balance at the end of August of US$553 million.
With this deal, S32 expect to deliver strong returns. The firm is also working with its partner at Alumar in Brazil to investigate a restart of the smelter using renewable energy. Both investments are consistent with the company’s strategy to increase its exposure to the base metals required for the energy transition to net-zero emissions.