The Australian share market is home to some of the largest mining companies in the world. But which of these ASX 200 mining shares could be top additions to your portfolio?
To narrow things down, let's take a look at which mining giants Goldman Sachs is currently recommending as buys. Here's what the broker is saying:
Image source: Getty Images
Rio Tinto Ltd (ASX: RIO)
Goldman Sachs believes that Rio Tinto is an ASX 200 mining giant to buy.
It is of course one of the world's largest miners with a diverse portfolio spanning multiple commodities such as aluminium, copper, iron ore, and lithium.
Goldman Sachs reckons Rio Tinto is a buy because of its attractive valuation, strong free cash flow generation, and production growth outlook. It explains:
We are Buy rated (on CL) on RIO due to: (1) compelling relative valuation vs. peers, (2) Strong FCF and dividend yield with our bullish view on iron ore, aluminium and copper prices, (3) Strong production growth in 2023 & 2024, (4) Pilbara turnaround (~50% of group NAV), (5) Compelling high margin low emission aluminium exposure.
Goldman has a buy rating and $136.20 price target on its shares.
South32 Ltd (ASX: S32)
Another ASX 200 mining giant that Goldman Sachs is bullish on is South32.
It is a diversified mining and metals company producing alumina, aluminium, bauxite, energy and metallurgical coal, manganese, nickel, silver, lead and zinc.
Goldman Sachs is a fan of the company and has a buy rating and $4.90 price target on its shares. It believes its shares are also attractively priced, particularly given the huge dividend yields that could be coming in the near term.
Its analysts commented:
We upgrade S32 to Buy (from Neutral) on attractive valuation: Trading at ~0.95xNAV (A$4.6/sh) and on an implied TSR of ~29%, and an attractive NTM EV/EBITDA multiple of ~2.1x vs. the sector average of 4.5x. We assume the share buyback continues (at ~US$250mn p.a) and S32 pays out 50% of earnings (40% ordinary, 10% special dividend component) with the FY23 full year result. On our estimates, S32 is on a supportive dividend yield of c. 5% in FY23, increasing to 14% in FY24.
