ASX 200 Mining Stocks: Top Performers After Quarterly Reports

August 14, 2024
12:13 am
Stock Piper Team

The latest quarterly reports have highlighted some standout performers in the ASX 200 mining sector. Companies like Nickel Industries (ASX: NIC), Rio Tinto Ltd. (ASX: RIO), and Fortescue Ltd. (ASX: FMG) have shown diverse outcomes, with varying impacts on their share prices. Let's delve into the specifics of these reports and their implications for investors.

Nickel Industries: Resilient Performance Amid Challenges

Nickel Industries has demonstrated resilience in the face of challenging conditions. As of the latest update, the company's share price is up by 4.6%, trading at 84 cents apiece. This marks an impressive 19% increase year to date, indicating strong investor confidence.

Despite encountering a challenging wet season, Nickel Industries reported robust financial performance. The company achieved earnings before interest, taxes, depreciation, and amortisation (EBITDA) of US$79.5 million for the quarter, up from US$74.5 million in the previous quarter. This growth is noteworthy given the adverse weather conditions impacting operations.

Additionally, Nickel Industries established a US$250 million Indonesian bank facility and repaid US$245 million of April 2024 notes. The miner also increased its stake in the Excelsior Nickel Cobalt HPAL project to 44%, highlighting its strategic expansion efforts.

Managing Director Justin Werner emphasised the company's resilience, stating, "Despite very challenging conditions, including persistent above-average rainfall during the quarter, our mine and RKEF [Rotary Kiln Electric Furnace] operations were able to perform robustly." With the onset of the dry season, Nickel Industries is poised for a strong second half, with July mine sales reaching near-record levels.

Rio Tinto: Strong Performance and Positive Outlook

Rio Tinto shares recently gained attention after the release of its half-year results, with a 2.5% increase, closing the session at $117.48. Goldman Sachs has expressed a bullish outlook on Rio Tinto, predicting continued share price growth.

The company's half-year results were solid, with underlying EBITDA of US$12.1 billion and nett profit after tax (NPAT) of US$5.8 billion. These figures were in line with Goldman Sachs' and Visible Alpha's consensus estimates. Rio Tinto's performance in the Pilbara and aluminium segments exceeded expectations, benefiting from modest deflation.

Goldman Sachs highlighted Rio Tinto's positive production growth outlook, particularly in major projects like Simandou, the Pilbara, and Oyu Tolgoi. The broker anticipates a compound annual growth rate (CAGR) of around 3% from 2024 to 2028. This growth, coupled with Rio Tinto's high-quality advanced projects and potential for significant value creation, underpins the optimistic forecast.

Goldman Sachs reiterated its buy rating for Rio Tinto, with a slightly adjusted price target of $136.60, implying a 16% potential upside over the next 12 months. The broker also forecasts attractive fully franked dividend yields of 5.5% in FY 2024 and 5.8% in FY 2025, driven by strong free cash flow and production growth.

Fortescue: Navigating Market Volatility

In contrast, Fortescue has faced significant share price declines, down 15% in the past month and 37% year to date. The recent $1.9 billion sell-down by Capital Group, a long-term shareholder, has contributed to this decline. This large sale increased the supply of Fortescue shares in the market, putting downward pressure on the share price.

Furthermore, the falling iron ore price, which started the year above US$140 per tonne and has since dropped to close to US$100 per tonne, has negatively impacted Fortescue. China's economic slowdown and weak construction environment have reduced demand for Australian iron ore.

Despite these challenges, Fortescue's operational performance remains strong. The company expects to ship between 190 million to 200 million tonnes of iron ore in FY25, including 5 million and 9 million tonnes from Iron Bridge. However, the increase in supply could further pressure iron ore prices.

Leading brokers like Morgans and JPMorgan view the current low share price as a buying opportunity, with a price target of $23, suggesting a potential rise of over 20% in the next year. However, some investors, including the author of this analysis, prefer to wait for an even lower entry point, potentially below $17, considering the uncertain outlook for iron ore prices and demand for green hydrogen.

The ASX 200 mining stocks have shown diverse performances following their quarterly reports. Nickel Industries has demonstrated resilience and growth potential; Rio Tinto is positioned for continued strength; and Fortescue, despite recent declines, presents a potential buy-the-dip opportunity. Investors should consider these reports and market conditions when making investment decisions in the mining sector.