Investment opportunities in the ASX mining sector have garnered attention as two companies emerge as potential top buys. Fund manager L1 Capital has highlighted Westgold Resources Ltd (ASX: WGX) and Mineral Resources Ltd (ASX: MIN) as appealing options for investors, despite fluctuations in their share prices. Both companies offer exposure to key commodities including iron ore, lithium, and gold.
Westgold Resources: A Strong Performer
The recent surge in the gold market has propelled ASX gold shares, with Westgold Resources standing out. The company has experienced a notable 30% increase in share price throughout October. This rise is attributed to various factors, including significant public fiscal deficits, a weakening US dollar, and increased accumulation by emerging market central banks.
In October, Westgold released a three-year outlook that was positively received by the market, indicating a transformation into a producer of substantial scale. The company anticipates production of approximately 325,000 ounces in FY25, with expectations to reach 470,000 ounces by FY28. L1 Capital expressed optimism regarding the medium-term growth potential of Westgold’s production capabilities.
“We believe there remains significant medium-term upside to grow this production number further,” L1 stated, emphasizing the company’s focus on scalable operations through increased investment in exploration.
Mineral Resources: Capitalizing on Market Trends
Mineral Resources Ltd operates in both iron ore and lithium mining, positioning itself well to benefit from the recovering lithium prices. This recovery follows the closure of a major operation owned by CATL and speculation regarding further supply cuts from China. The company recently completed upgrades to the Onslow iron ore project’s road infrastructure, eliminating a bottleneck that previously hindered full operational capacity.
Notably, the Onslow project exceeded its targeted nameplate iron ore shipments, achieving 3.2 million tonnes in August compared to a target of 2.9 million tonnes per month. At full capacity and with iron ore prices projected at US$100 per tonne, Mineral Resources expects to generate approximately $1.3 billion in operating profit (EBITDA), significantly aiding in de-leveraging its balance sheet.
Furthermore, the company has successfully priced a US$700 million bond set to mature in 2031, replacing an equivalent amount maturing in 2027. This move is expected to enhance its near-term liquidity.
L1 Capital has pointed out that Mineral Resources is also undergoing a governance reset, with new non-executive directors appointed following the arrival of Malcolm Bundey as chair in July. The fund manager remains confident in the company’s potential for substantial improvement across its core segments over the medium term.
“We believe the risk-reward at the current share price still remains compelling,” L1 concluded, reinforcing the attractiveness of both mining shares.
As the ASX mining sector continues to evolve, investors are encouraged to consider these insights before making investment decisions. While Westgold and Mineral Resources present promising opportunities, it is essential for potential investors to conduct thorough research and consider their individual investment strategies.
