Down 20% in a month, is this stock 'one of the highest quality mining companies on the ASX'?

Long-term views are bullish.

| More on:
Three coal miners smiling while underground

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX mining stocks have shown mixed performances this year. Whitehaven Coal Ltd (ASX: WHC) shares have been on a bumpy ride recently, shedding almost 20% of their value over the past month.

The stock peaked at $8.97 apiece on 9 July before levelling back to a longer-term range of $7.41 one month ago.

Since then, Whitehaven shares have slipped deeper into the red and currently fetch $6.05 apiece at the time of writing.

Despite hailing from the energy sector, the company is typically viewed as an ASX mining stock. And one fund manager is particularly bullish on its prospects.

In fact, Blackwattle Mid Cap Quality Fund has labelled Whitehaven "one of the highest quality mining companies on the ASX."

Let's take a closer look.

Created with Highcharts 11.4.3Whitehaven Coal PriceZoom1M3M6MYTD1Y5Y10YALL1 Jan 202418 Sep 2024Zoom ▾Jan '24Feb '24Mar '24Apr '24May '24Jun '24Jul '24Aug '24Sep '24Jan '24Jan '24Mar '24Mar '24May '24May '24Jul '24Jul '24Sep '24Sep '24www.fool.com.au

What's driving the downturn?

Whitehaven Coal's recent decline can be traced back to weakening metallurgical coal prices, largely influenced by a slowdown in China's property market. This has influenced many ASX mining stocks.

As steel consumption in China dips, so does the demand for metallurgical coal, a key ingredient in steelmaking.

According to Trading Economics, recent economic data also suggests a weakening in US factory activity for the "fifth consecutive month"

In August, Whitehaven shares fell 13%, making it the largest negative contributor to the Blackwattle Mid Cap Quality Fund's performance for the month. However, the fund says it's not all doom and gloom.

The company's FY24 numbers, alongside recent asset sales, have Blackwattle's portfolio managers constructive on the ASX mining stock.

WHC was the largest negative contributor to performance during the month. WHC fell 13% in August on weakening metallurgical coal prices. WHC is an Australian coal producer with thermal coal mines in NSW and recently acquired metallurgical coal mines in QLD.

WHC delivered a strong FY24 result, but more importantly announced the sell-down of 30% of the recently acquired Blackwater Coal mine at a significant premium to the original acquired price from BHP.

This sell-down places WHC in a net cash position, substantially reducing downside risk for the company.

Is Whitehaven a top ASX mining stock?

Despite the short-term headwinds, many analysts, including the Blackwattle team, view Whitehaven Coal as a high-quality ASX mining stock.

Blackwattle Mid Cap Quality Fund sees material long-term upside for Whitehaven, describing it as an "improving/enduring quality" business.

We continue to see material long-term upside for WHC as an 'improving / enduring quality' business and view WHC as one of the highest quality mining companies on the ASX, with strong financials and a capital disciplined management team.

We expect WHC to execute on numerous multiyear internal levers to maintain and improve the business quality including: cost reduction and production improvement in the acquired metallurgical coal mines, paydown of the deferred BHP acquisition payments, Vickery expansion & selldown, Daunia/Winchester South expansion & selldown and further disciplined capital management.

Meanwhile, analysts at JPMorgan echo the fund's sentiment. The firm recently upgraded Whitehaven to a buy rating with a price target of $9.20 apiece.

According to my colleague Bernd, JPMorgan sees a much stronger performance on the horizon for the ASX mining stock.

The stock is also rated a buy based on the consensus of analyst estimates, according to CommSec data. This rating is made up of 11 buys, four holds ratings, and zero brokers recommending to sell Whitehaven at this point.

Foolish takeaway

Although Whitehaven Coal may have hit a rough patch recently, experts say its long-term prospects still shine bright. The ASX mining stock is down around 10% in the past year.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

A smiling miner wearing a high vis vest and yellow hardhat does the thumbs up in front of an open pit copper mine.
Broker Notes

Why Macquarie expects this ASX All Ords copper stock to soar 48% in a year

Macquarie forecasts another big year of gains ahead for this ASX All Ords copper stock. But why?

Read more »

Female miner standing smiling in a mine.
Broker Notes

Why Macquarie predicts Pilbara Minerals shares could surge 71%

Macquarie forecasts a big rebound ahead for Pilbara Minerals shares. Let’s find out why.

Read more »

Two mining workers in orange high vis vests walk and talk at a mining site.
Resources Shares

ASX All Ords mining stock sinks on US silver acquisitions

Investors are bidding down the ASX All Ords miner on US acquisition news. But why?

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

How these 2 tailwinds could boost the BHP share price into 2026

A leading expert forecasts that BHP shares are set to recover. But why?

Read more »

a miner holds his thumb up as he holds a device in his other hand.
Resources Shares

3 reasons why the BHP share price could still be a buy

There are a few reasons why this mining giant could be appealing.

Read more »

Miner standing in front of trucks and smiling, symbolising a rising share price.
Resources Shares

The pros and cons of buying Fortescue shares in June

Let’s dig into whether it’s a good time to invest in this mining giant.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Why did the Mineral Resources share price rip 15% higher today?

The iron ore and lithium giant was the fastest riser of the ASX 200 on Thursday.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Resources Shares

2030 forecast: As Australia's iron ore export earnings decline, copper will rise. What does this mean for BHP shares?

BHP is expanding its iron ore and copper production.

Read more »