Introduction to ASX Mining Shares
There are over 700 companies, roughly a third of companies on the ASX, involved in the mining and resources sector. It is home to a handful of major miners and hundreds of junior explorers, hoping to find the next big mine. These companies mine or prospect for all sorts of metals from precious metals like gold, to battery metals like lithium.
The fate of the broader ASX is contingent on the performance of mining stocks, whatever sector they are in.
Why invest in mining stocks?
Investing in mining stocks offers exposure to underlying commodities that are key to several industries, including technology and renewable energy. These are stocks with high growth potential, especially in sectors such as lithium (essential for electric cars and energy storage).
Many established mining companies, such as BHP, pay dividends regularly, which can look particularly attractive to income-seeking investors. In addition, mining stocks are a good buffer against inflation. Commodity prices often increase with the level of inflation in general. On the other hand, investors must be aware that they carry risks, both those typical to all stocks and some specific to this industry, particularly commodity prices.
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How to choose the right ASX mining stocks?
Consider your investment objectives and risk tolerance when choosing ASX mining stocks. Learn the ins and outs of the mining industry, take the specifics for granted and understand the ever-changing supply and demand. Compare and contrast businesses based on their management quality, operational efficiency and financial stability. With the growing importance of sustainable practices, environmental and social responsibility must be taken into account. One way to reduce the impact of potential losses is to spread your interests across multiple products and companies.
4 Best ASX Mining Stocks to Buy Now in 2024
BHP Group (ASX: BHP)
BHP shares are the ASX’s 2nd most valuable, with the company capped at over A$215bn. Only CBA (ASX:CBA) is larger, at over $220bn, but only two other companies are valued above $100bn (CSL and NAB if you were wondering). Rio Tinto for comparison is not even capped at $50bn.
Perseus Mining (ASX: PRU)
Perseus Mining (ASX:PRU) is one of the ASX’s under the radar gold stocks. This is not just because it has gained over 350% in 5 years, but also because it is one of the few to have thrived in Africa. In fact, the company is the 4th largest pure-play gold miner behind Newmont, Northern Star and Evolution.
Bellevue Gold (ASX: BGL)
Meet Australia's newest gold producer. It bought its namesake project in WA after it had spent 15 years in the hands of Barrick, which had done little work on the project. It had been an operating mine between 1897 and 1997 and produced nearly 1Moz (million ounces) of gold but had appeared to run out of life.
De Grey Mining (ASX:DEG)
De Grey Mining has the Hemi Gold Project in WA, that is 85km by road from Port Headland. It was discovered less than four years ago and has still had limited exploration considering it is part of a 150km-long provincial scale tenement package, but it has delivered for shareholders.
4 Best ASX Mining Stocks to Buy Now in 2024
BHP Group (ASX: BHP)
BHP shares are the ASX’s most valuable, with the company capped at over A$215bn. Only CBA (ASX:CBA) is larger, at roughly $220bn, but only two other companies are valued above $100bn (CSL and NAB if you were wondering). Rio Tinto for comparison is not even capped at $50bn.
BHP's global hеadquartеrs arе locatеd in Mеlbournе but has projects and offices all over the world. The company operates across several continents, with significant operations in Australia, South America, and Papua New Guinea. It has interests in iron ore, copper, metallurgical coal, nickel and potash.
It is renowned for its diversified portfolio of world-class assets as well as its proven track record of disciplined capital allocation. It made a US$13.7bn profit in FY24 off the back of US$55.7bn in revenue.
BHP faces some difficulties with falling commodity prices and persuading investors that it is a solution to decarbonisation rather than being an obstacle. However, we think it stands above its peers because of its diverse portfolio of assets and its exposure to iron ore and copper.
No, BHP is not the only company in the world to export these commodities, but because of how many mines it has all over the world, it can attract more customers. It is a no brainer for customers to pick BHP over other companies with fewer assets.
Perseus Mining (ASX: PRU)
Perseus Mining (ASX:PRU) is one of the ASX’s under the radar gold stocks. This is not just because it has gained over 350% in 5 years, but also because it is one of the few to have thrived in Africa. In fact, the company is the 4th largest pure-play gold miner behind Newmont, Northern Star and Evolution.
This said, it trades at a big discount to the above 3 companies despite generating 9-figure profits and not suffering cost inflation and profit downgrades in the same way that companies with projects closer to home have.
Perseus has 3 operating mines. The Edikan mine in Ghana as well as the Sissingue and Yaoure mines in Cote d’Ivoire. These assets produced over 500,000/oz in CY23 with an AISC of under US$1,000 and average sale price of US$1,913/oz.
The company recently picked up the Nyanzaga project in Tanzania. The mine is expected to be in operation in the 2nd half of CY25 and produce 250koz over 8 years. There’s a capex bill of US$474m but a 2.6Moz resource, an NPV (using a discount rate of 5%) of US$926m and IRR of 31%. The AISC is US$954/oz.
Bellevue Gold (ASX: BGL)
Meet Australia's newest gold producer. It bought its namesake project in WA after it had spent 15 years in the hands of Barrick, which had done little work on the project. It had been an operating mine between 1897 and 1997 and produced nearly 1Moz (million ounces) of gold but had appeared to run out of life. The company began a drilling campaign in the last quarter of 2017 and has never looked back, delivering a return of over 5000% to investors.
It has Total Mineral Resources of 9.8Mt at 9.9 g/t for 3.1Moz of gold. 1.7Moz of this is Indicated with the balance inferred. This makes it one of Australia’s highest-grade gold mines. Production has just begun. The company forecasts a 10 year mine life and for $2.1bn of free cash flow, assuming a gold price of A$2,500/oz. This is the stuff dreams are made of.
The company prides itself not just on its ‘rags to riches’ story but how it is fully funded with A$133m in liquidity and has a solid ESG angle. It is aiming for Net Zero by 2026, to be 70-80% renewable energy powered and it has signed appropriate agreements with local Indigenous landholders.
Production began in late October 2023 with the first gold pour. Again, BGL has never looked back.
De Grey Mining (ASX: DEG)
De Grey Mining has the Hemi Gold Project in WA, that is 85km by road from Port Headland. It was discovered less than four years ago and has still had limited exploration considering it is part of a 150km-long provincial scale tenement package, but it has delivered for shareholders.
Since successful drilling in early 2020, the company has never looked back, constantly growing its resource and delivering study after study showing this could be a fairdinkum gold mine. In fact, one of Australia’s to p5 based on production. The Ore Reserve is 6.0Moz @ 1.5g/t gold and could produce 5.7Moz over 12 years, equating to over 500,000 ounces per annum.
It would deliver $4.5bn in free cash flow after tax, a payback of less than 2 years despite a capital cost of nearly $1.3bn. And it is set to begin production in the second half of CY26. Chalice will have barely made an Final Investment Decision (FID) by then.
The DFS showed an NPV of $2.9bn post-tax, representing an IRR of 36% at an AISC of $1,295/oz over the first 10 years. The total evaluation period economic contribution is a staggering $10.8bn. Construction has not yet begun, although all necessary approvals are expected in time to start full construction in the second half of this year.
What is the Future Outlook for the ASX Mining Sector?
A mixed picture emerges for ASX Mining Stocks. Ultimately, they all depend on future commodity prices predominantly. Gold is strong and will continue to be for sometime, although many battery metals are stuck in the toilet right now - to the point where some companies like Core Lithium and Panoramic had to mothball their projects.
It is also uncertain as to the impact decarbonisation will have on them. Despite many companies' PR and IR departments claiming their firms are part of the solution as their metals go into technologies like electric vehicles, there is increasing awareness of the environmental impact of mining and a questioning as to whether or not the costs outweigh whatever benefits that may be derived.
The pros and cons of investing in ASX Mining Stocks
Investing in ASX mining stocks offers exposure to core commodities such as iron ore and lithium, which are critical to various industries and represent significant growth potential and potential dividend income. Many of the major miners are significant dividend payers. If you invest in a small cap explorer that find the next big deposit, you can make spectacular returns - just ask investors in companies like De Grey, Chalice or Liontown!
Although the mining industry can generate returns for investors, not to mention for employees and the broader economy, it is more cyclical compared to other sectors. Environmental issues and geopolitical risks in mining areas add additional layers of complexity. In addition, projects in this sector often face long lead times and high initial investment with potential development bottlenecks. By the time Chalice is scheduled to enter production, in CY29, it will have been nearly a decade since it first discovered the Julimar deposit.
Are ASX Mining shares a good investment?
Whether ASX mining stocks are a good investment depends on several factors.
Ultimately, investors want a return and whether or not it is a good investment on the return you make from them. There are some that have proven to be good investments, but others have been less successful.
Major miners might be a good investment for income-oriented investors, although dividends may come at the expense of reinvesting profits back into the business, to buy new projects that could increase profits further.
FAQs on Investing in Mining Stocks
We think the best ASX mining stocks right now are Bellevue Gold, BHP, De Grey and Perseus Mining.
Our Analysis on ASX Mining Stocks
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