Are these the best ASX mining stocks to watch?

Australia as a country is synonymous with mining culture.

Australian mining

This is primarily for three reasons: first, it has large world-class deposits of critical minerals and precious metals, second, its 26-million-strong population is comparatively small and 72% live in major cities, making mining remote areas unlikely to face significant disruption, and finally, it is ideally located close enough to China to facilitate cheap trade with the world’s second-largest country.

Iron is by far the most important metal that Australia mines, and iron ore itself is the country’s single largest source or export revenue, worth AU$124 billion in 2023. The next three most important mining exports, coal, gold, and copper combined together are still not as valuable in export terms. For context, Australia is the world’s biggest exporter of both iron ore and coal.

Of course, most of this iron has been funnelled into China, by far Australia’s largest two-way trading partner. Despite recent economic concerns as a result of the pandemic, Australia has benefited huge from the Chinese economic miracle.

Critical Minerals could take centre stage in 2024 — copper, cobalt and lithium — are all essential for the green revolution, and in particular, mass adoption of electric cars. The long-term supply gap for these metals has been reported extensively both here at IG and elsewhere, and should help to prop up the prices of these commodities, even through any potenital downturn.

Top ASX mining stocks to watch in 2024

The following ten companies are the largest mining businesses on the ASX by market capitalisation as of 8 May 2024. They may not necessarily be the best investments available, and there is a level of subjectivity to what constitutes a mining stock.

1. BHP Group
2. Fortescue
3. Rio Tinto
4. South32
5. Northern Star Resources
6. Mineral Resources
7. Pilbara Minerals
8. Newmont
9. Bluescope Steel
10. Evolution Mining

BHP Group

BHP Group is Australia’s largest diversified mining company with operations spanning iron ore, coal, copper, petroleum, gas and nickel.

BHP, like Fortescue and Rio Tinto, was a significant benefactor of the recent runup in iron ore prices in 2021, but like its rivals, is dependent on a strong iron ore price — itself arguably dependent on a strong Chinese economy. At present, this may be a risk factor, though China has taken significant recent steps to bolster its all-important real estate sector, including easing lending requirements and lowering downpayments.

BHP also recently bought out copper producer Oz Minerals for AU$9.6 billion.

The major is headquartered in Melbourne, Australia.

Fortescue Metals Group

Fortescue Metals Group is unlike competitors in that it is a pure play iron ore miner. Though the company was mired by operational uncertainty at the start of the last decade, it has since grown from strength to strength, and is now one of the largest public companies in Australia.

Much of its success can be attributed to China’s insatiable demand for iron ore, with FMG’s lower grade mix increasing exponentially in popularity in the last few years. Of course, investing a pure-play iron miner means accepting an increased risk-reward ratio as the world enters into a potentially recessionary period. In this respect, it faces many of the same risk factors as BHP.

Rio Tinto

Unlike Fortescue, Rio Tinto investors benefit from diverse mining operations, with a main focus on iron ore, aluminium, and copper. The miner is dual listed in London, and targets returning between 40% and 60% of underlying earnings back to investors in dividends each year.

With the price of iron ore largely dependent on Chinese economic strength (it’s important to stress this point), Rio is actively seeking to diversify, seeking out lithium acquisitions in Australia, and having already bought out the Oyu Tolgoi $3.3 billion Mongolian copper mine.

South32

Despite losing more than a third of its market valuation since its all-time-high in April 2022, South32 remains an important Australian miner for its coal mining activities, despite sustained political pressure on fuel and solid environmental concerns.

While South32 may be best known for its coal operations, the miner’s operations span significantly beyond that, with production across aluminium, energy, metallurgical coal, manganese, nickel, silver, lead and zinc. And it’s geographically diversified across Australia, Africa, and South America.

The stock has also been on a sharp recovery since March 2024.

Northern Star Resources

Northern Star Resources touts a number of tier-1, low sovereign risk operations across Australia (Jundee, South Kalgoorlie) and North America (Pojo). Speaking to the prolific nature of these operations, the miner had produced over 20 million ounces of gold.

Moreover, it's expanding Kalgoorlie with an AU$1.5 billion mill expansion project over the next three years. As the miner notes on its website: ‘Northern Star has a portfolio of low-cost, high-grade underground gold mines, and is firmly focused on maximising Shareholder returns.’

Mineral Resources

Mineral Resources boasts a portfolio of what is described as a set of world-class mine sites across the Pilbara and Goldfields regions within Australia. And its smaller size does come with one advantage: it’s been able to grow by more than 400% over the past five years.

A distinctly forward-focused miner, the company notes on its website: ‘we look for opportunities to grow our core business through producing commodities and innovation. In executing this model, we are undertaking a number of key growth projects that, combined, will deliver a 30 to 50-year pipeline of work to our mining services business.’

Pilbara Minerals

Pilbara Minerals operates and owns a 100% interest in the Pilgangoora Project near Port Hedland in Western Australia, widely regarded as one of the largest hard rock lithium deposits in the world.

Pilbara is widely regarded as the trailblazer of the ASX lithium boom, and despite a recent fallback, has seen a spectacular rise in recent years. While lithium's price dropped substantially in 2023, a recovery may soon be underway as Chinese stockpiles amassed in 2022 finally start to dwindle.

The company is continuing to spend heavily on expansion despite the weak lithium sentiment at present.

Newmont

Newmont recently concluded its AU$26.2 billion takeover of Newcrest Mining, leading to the formation of what is now the world’s largest gold miner. The combined portfolio comprises more than half of the world’s tier-one assets with long-life operations, huge exploration prospects, and substantial value-accretive projects.

It’s also worth noting that the merger has also seen the combined company control significant copper assets. CEO Tom Palmer recently made a plea to Australia's government to do more to become a copper mining superpower.

BlueScope Steel

BlueScope Steel is an Australian flat steel producer that was spun off from BHP back in 2002. Flat steel is rolled from steel slabs and is used in the production of sheets, plates, structural beams and strips — and is essentially irreplaceable within buildings, infrastructure, transportation and electrical appliance industries.

While the company has delivered significant returns, it has been ordered to pay a $57.45 million penalty by the Federal Court for attempting to fix prices for flat steel products supplied in Australia — the highest ever imposed for cartel conduct in the country.

Positively, it recently announced a $300 million refurbishment of its 60-year-old plate mill at Port Kembla.

Evolution Mining

Like Northern Star, Evolution Mining focuses on low risk, tier-1 jurisdictions – with operations across Canada and Australia. The miner’s key growth prospects include: Cowal underground, Red Lake transformation, Ernest Henry mine life extensions and Mungari discovery.

From a strategic perspective, management is focused on driving growth by ‘improving the quality of our assets rather than increasing the number of assets in the portfolio.’ For context, the company maintains that mid-tier producers tend to deliver shareholders with the best returns.

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