A subdued China, an uncertain commodities outlook and ESG concerns continue to challenge miners. However, some opportunities are still available for investors. By pinpointing several charts in the latest industry pulse on the mining sector, we uncover a number of trends that position a number of stocks for a solid outlook.

Investor subscribers can get full access to the report here.

ESG and macroeconomic concerns hit miners

Thermal Coal Miner Whitehaven (WHC) and gold miner Newmont (NEM) are among the stock picks in the latest industry pulse report.

According to Morningstar analyst and report author Jon Mills, compared with other miners, gold and thermal coal firms are cheap on macroeconomic and ESG concerns.

Chart 1: Gold and Thermal Coal Miners Undervalued

chart 1


Thermal coal prices to be supported by supply constraints

According to Mills, Whitehaven is well-placed to benefit from continued strong demand for high-quality thermal coal over at least the next decade as highlighted in the chart below.

“Demand for high-quality coal, such as from Whitehaven, is likely to remain robust in Southeast Asia in particular. It helps meet energy needs while reducing emissions relative to using lower-quality coals, such as those from the largest volume exporter, Indonesia.”

Chart 2: Thermal coal prices likely to remain elevated

chart 2

Iron ore demand robust despite a subdued China

Moreover, iron ore imports remain strong despite China’s economic challenges. This will bode well for Whitehaven as China accounts for about 70% of seaborne iron ore demand. “Imports remain strong, as reflected in the surprisingly elevated iron ore price and miner profits,” says Mills.

Chart 3: China iron ore imports still strong

chart 3


Demand for gold recovering

Chart 4: Demand recovering from COVID-19 lows

chart 4

Gold miner Newmont is also well positioned as demand for gold recovers from COVID-19 lows. “Gold production has recovered from the COVID-19-induced hiccups in 2020 when the output from many mines was either restrained or temporarily curtailed,” Mills says. “However, we forecast more modest increases in mine supply across our coverage.”