Analyst Note| Mathew Hodge, CFA |
Mining stocks largely traded sideways in the first quarter of 2021 with the S&P/ASX200 resources index adding just 0.2% versus 3.1% for the broader ASX 200 index. Our coverage moves from an average 25% premium to our fair value estimates in our last quarterly update to a 10% premium now. The change primarily reflects fair value increases given ongoing near-term commodity price strength, especially for iron ore and copper. Only thermal coal-exposed firms New Hope and Whitehaven are still trading in 4-star territory although Glencore, Iluka Resources, Newcrest and South32 are at modest discounts. Undervaluation from COVID-19 is a distant memory, thanks to Chinese government stimulus and lending. Iron ore and copper have benefited most.