One area of the market that has been tipped to perform strongly this year is the mining sector. This is thanks to the positive commodity price backdrop and favourable valuations, as mentioned here.
In light of this, if you’re looking for exposure to the mining sector in 2022, then you may want to check out the two shares listed below. Both of these ASX mining shares have been given conviction buy ratings by the team at Goldman Sachs. Here’s why it is bullish:
Iluka Resources Limited (ASX: ILU)
The first mining share to consider is this mineral sands company. Goldman believes it could be a top option for investors due to the favourable outlook for mineral sands and its exposure to rare earths.
The broker explained: “We are Buy rated on mineral sands/rare earth producer ILU and add the company to our Conviction List (CL) on attractive valuation and compelling Zircon and TiO2 price upside and Rare Earth growth potential. ILU is trading at a >50% discount to RE peers and >10% discount to min sands/pigment peers on an EV/EBITDA basis. Iluka recently released a larger-than-expected maiden resource on the Wimmera rare earth (RE) & zircon deposits in Victoria containing over c.1Mt of rare earth oxides (REO) and 10.6Mt of zircon. The Wimmera deposit is an important part of ILU’s rare earth growth strategy.”
Goldman has a conviction buy rating and $12.40 price target on Iluka’s shares.
South32 Ltd (ASX: S32)
Another ASX mining share that Goldman has on its conviction list is South32. The broker likes this diversified miner due to its attractive valuation, strong free cash flow outlook, capital return potential, and positive project news flow.
Goldman explained: “We are Buy rated on S32.AX (on Conviction List) with strong FCF (19% base case for FY22), exposure to base metals (aluminium & alumina c. 50% of FY22 EBITDA; we are bullish aluminium on a multi-year view, zinc/nickel c. 20%), and earnings upside from the Sierra Gorda copper acquisition (c. 15% upside to our EBITDA; not in our numbers pending deal completion; expected 1Q22).”
The broker currently has a conviction buy rating and $4.70 price target on its shares.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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