Morningstar picks MinRes, Iluka as cheapest commodities stocks
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The news: Shares in Mineral Resources and Iluka Resources gained on the ASX after Morningstar named the pair among the cheapest commodities stocks on the sharemarket.
The numbers: Mineral Resources was up 4.8% to $28.52 by 1:10pm AEST while Iluka Resources rose 4.6% to $6.31.
The context: Morningstar analyst Jon Mills said Mineral Resources is the cheapest across its non-lithium-focused mining coverage.
Lower near-term iron ore and lithium prices are driving its 39% discount to fair value, Mills said, but earnings are expected to rise as its lower-cost, long-life Onslow iron ore mine ramps up and lithium prices recover.
Meanwhile, Millls noted that Iluka's 36% fair value discount is likely due to soft near-term mineral sands demand, but Morningstar sees that demand recovering.
Elsewhere, worries over global growth — generally bearish for thermal coal demand — sees coal miners Whitehaven and New Hope trading 35% and 24% below fair value, according to Morningstar.
Whitehaven is also affected by a lower metallurgical coal price, Mills said, but demand for met coal and high-quality thermal coal is likely to be persistent.
The source: Morningstar research
