While there isn’t enough evidence that the big miners have turned the corner, I am tempted to ask whether the smoke we saw last week is an indication that a fire is stoking up under mining prices. Read on.
Last week, BHP put on 4.5% to $38.73, which was one of its best weeks for some time. It begs the question whether the rotation out of the likes of our big banks (and other star ASX top 20 stocks) into the miners and those companies that will benefit from the three or four expected rate cuts is happening?
In case you missed it, RIO added 1.54% to be priced at $108.80, while South 32 put on 6.85% for the week. Even Pilbara Minerals, now called PLS, spiked 8.6%.
That said, after a Thursday when BHP rose 5.6% on higher iron ore prices, there was weakness for miners on Friday.
Helping iron ore players was the following from caixinglobal.com: “China’s manufacturing sector returned to expansion in June following a brief contraction in May, although overseas demand continued to fall amid persistent external uncertainties, a Caixin-sponsored survey showed Tuesday.
“The Caixin China General Manufacturing Purchasing Managers’ Index (PMI), which gives an independent snapshot of the country’s manufacturing sector, came in at 50.4, up from 48.3 in May. A reading above 50 indicates an expansion in activity, while a number below that signals a contraction.”
Clearly, while there isn’t enough evidence that the big miners have turned the corner, I am tempted to ask whether the smoke we saw last week an indication that a fire is stoking up under mining prices?
So, I thought I’d share with you what the analysts are saying about some of the big names of mining that you might want to add to your portfolio.
The FNArena look at BHP tells us that five out of six analysts like the company, with a consensus rise of 7.2% upside that I think looks fairly conservative.
BHP
I think Morgans will prove to be more on the money, but it’s fair to be wary of the Trump tariff negotiations with China that could help or hinder the profit aspirations of the Big Australian. Despite their bigger predicted price rise, Morgans has pulled back its enthusiasm for the stock. “Morgans explains Chinese export profits are under pressure from tariffs, and Beijing is anticipated to adopt an enforcement policy on high-emission mills to cut production,” FNArena reported. “For BHP, iron ore represents 55% of FY26 earnings (EBITDA) forecast, so every US$5/tonne price move impacts earnings by 2%, both up and down. A decline in the iron ore price below US$80/tonne would force a dividend cut, the analyst warns.”
Watching China’s upcoming runs of economic data and the Trump tariffs will be critically important for BHP’s future share price.
Rio Tinto is in a similar boat. While the analysts see a 6.5% rise in the pipeline, both Ord Minnett and UBS predict a 10.26% rise ahead. Analysis from UBS is worth noting as it was produced last Thursday as the share prices of iron ore miners jumped. “UBS continues to expect the trade war to impact metals prices over the next six months, with softening in consumption from Liberation Day uncertainty offset by moderate China stimulus,” FNArena revealed. “The broker raises industrial metal prices forecasts by around 5% for 2025 and remains “constructive” on positive secular demand commodities with supply challenges, like copper and aluminium, as well as positive on gold.”
While I believe these guys are more on the money, Trump remains the curve ball that could undermine my call.
The miner that has got me more excited is South 32 (S32), where the forecasted consensus rise is a nice 20.5%. Four out of six expert company watchers are on board with the diversified miner.
S32
As you can see, Macquarie and Morgans are big fans, so let’s find out why. “Morgans describes the March quarter as solid for South32, with production broadly meeting expectations aside from a downgrade at Cannington due to its late-life volatility,” FN Arena explained. “Production at Worsley alumina and aluminium assets slightly exceeded the broker’s estimates, while Sierra Gorda copper and South African manganese were in line. Cannington missed estimates by -10%, prompting FY25 guidance to be revised lower.”
Let’s look at why the likes of PLS had a good week on the market and try to work out that this gain was a good omen for lithium stocks generally.
The analysts tip a 12.5% rise, which would be an OK prospect if you hadn’t been invested at much higher prices. The chart below recalls a potentially sad stocks tale for many investors.
PLS
The stock is down 48% over the past 12 months and 719% since the all-time high of $5.42 in October 2022! To be accurate, the views on PLS and therefore lithium stocks are varied with a capital V.
While Macquarie is betting on a 51.82% gain, UBS is speculating that a 27.39% drop is on the cards.
Let’s get the positive view first.
“Macquarie notes a 23% increase in contained lithium at Pilbara Minerals’ mineral resource estimate for Pilgangoora operations. This was due to a 10% increase in tonnage and a 12% rise in grade. The company flagged upside potential from more exploration. While no clarity was provided on whether there would be a reserves update, the broker believes the company has options to target higher-grade mine plans.”
Now, let’s find out why UBS is so negative.
“UBS analysts moved back to an Underweight view on the lithium sector after lowering the forecast long-term spodumene price by -8% to US$1,200/t. The broker cut lithium demand forecasts by -12%, with 2030 demand now forecast at 2.8Mt, as weak demand from EVs is expected to be insufficient to offset the outperformance of Battery Energy Storage Systems.”
What’s important about these two views is that the UBS assessment was made on May 30, while Macquarie’s was later on June 12, which could be important given the latest price changes for materials, as well as the fall in the US dollar that helps commodity prices rise.
For those who like to speculate, here are some miners with big consensus calls on future share prices:
- Chalice Mining (CHN): +38.7%. Bell Potter goes for a 136.99% rise!
- Mineral Resources (MIN): + 15.9%. Macquarie and Morgan Stanley tip a 40.22% gain.
- Champion Iron (CIA): +37.2%. Citi sees a 45.41% rise ahead, despite CIA operating in the Trump-tested Canada!
One stock with a warning is Liontown Resources (LTR), with the consensus being a negative 22.3%. The table below shows how out of favour this company is.
LTR
For those wondering why I didn’t look at Fortescue Metals (FMG), well, the forecast rise is only 1.5%. The table below doesn’t raise confidence levels.
This was why Macquarie was negative on the company: “Fortescue announced updated targets on Iron Bridge and shipment run rates for the next three years, which are below consensus by -23% for FY26 and -9% for 2HFY27, Macquarie highlights. The company also announced the retirement of Mark Hutchison and Shelley Roberts, with CEO Dino Otranto given a greater remit and Gus Pichot appointed as Growth and Energy CEO.”
While FMG has a habit of rising and falling by bigger percentages that BHP and RIO, the company has had a lot of personnel issues, significantly since Twiggy and his wife separated. While it could be a coincidence, the history of marital break-ups and financial issues isn’t an easily ignored issue for investors with a memory!
While I’m prepared to go down the mine to be long iron ore and a little long lithium, I don’t want to do it with Twiggy right now.
