The three ASX mining shares I'm going to talk about in this article look like compelling buys for the long term, in my opinion. I particularly like the outlook for the copper miners.
Commodity prices are usually volatile. We don't know what will happen next year, next month, or even next week. If we did, it'd be much easier to value the miners.
But, I think it's safe to say that when resource prices go down, it typically leads to lower share prices for mining companies. That's understandable considering the profit and possible dividends from the miners will also be lower.
However, I think that lower share prices are a buying opportunity when it comes to commodities that are typically cyclical, such as copper.
It's worth keeping in mind, in the long term, copper demand is expected to rise as the world focuses more on decarbonisation.
Copper is essential for a variety of applications such as the power grid, renewable energy, electric vehicles, and so on. According to S&P Global, copper demand will double by 2035, which has the potential to open up a supply gap.
The copper price was below US$4 per pound last week, according to Commsec. Indeed, this lower price may have contributed to some of the declines in the ASX mining shares below.
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Sandfire Resources Ltd (ASX: SFR)
Sandfire Resources has a market capitalisation of $2.5 billion, according to the ASX. The Sandfire share price has fallen 13% from 21 February 2023.
The business is expecting to benefit from the US$1.86 billion acquisition of the MATSA copper operations in Spain in February 2022, as well as the ramping up of the new Motheo mine in Botswana.
Sanfire's earnings per share (EPS) is projected to soar by FY25, with a current projection of 42 cents, according to Commsec. If that happens, the Sandfire Resources share price could be valued at 13x FY25's estimated earnings and an FY25 grossed-up dividend yield of 3%.
Aeris Resources Ltd (ASX: AIS)
Aeris Resources has a market capitalisation of $373 million, according to the ASX. The Aeris Resources share price is down around 30% since 22 February 2023.
The company describes itself as a mid-tier metals producer, with a copper-dominant portfolio, comprising four operating assets, a long-life development project, and a "highly prospective exploration portfolio" across the country.
This ASX mining share is generating positive cash flow and is expected to generate earnings before interest, tax, depreciation and amortisation (EBITDA) of $80 million to $110 million in FY23.
In FY25, the business is predicted to make 17.4 cents of EPS. This puts the Aeris Resources share price at just 3x FY25's estimated earnings.
Rio Tinto Limited (ASX: RIO)
Rio Tinto is a massive ASX mining share. It has a market capitalisation of more than $42 billion. The Rio Tinto share price is down almost 10% since 3 March 2023.
This business produces a number of different commodities. Rio Tinto says that global demand is set to grow by between 1.5% to 2.5% per year.
Its Kennecott mine is located in Utah, in the US. The business is working on studies to expand the open-pit mine, as well as a possible underground mine below the existing open pit.
Rio Tinto also owns two-thirds of the Oyu Tolgoi mine, with the Mongolian government owning the other third. Rio Tinto manages the operations at Oyu Tolgoi which is one of the largest known copper and gold deposits in the world. When the mine is fully operational, it will be the fourth-largest copper mine in the world.
According to Commsec, Rio Tinto shares are trading at 12x FY25's estimated earnings with a possible FY25 grossed-up dividend yield of 7.7%.
