Miners in the lithium, copper, nickel and rare earths spaces are labelled as still cheap thanks to their leverage to green tech and electric vehicles.
The resurgence of metals miners will leave investors flush with dividends in 2021, according to Don Hamson, founder and managing director of Plato Investment Management.
“BHP, Rio and Fortescue are pulling iron ore out of the ground at $US12 or $US14 a tonne, so there’s a pretty good margin there,” he said.
Don Hamson of Plato Investment Management says Fortescue can pick up the dividend slack for bank investors. Michele Mossop
Even after its latest price surge Fortescue should still offer a 10 per cent gross yield, comparable to the big four banks in their heyday, according to Dr Hamson.
He remained confident 2021 would be a good year for income investors in the resources sector, even if iron ore is close to topping out.
“I think at $US168 a tonne it’s probably not sustainable, it’ll probably come back a little, but even if it came back $US50 a tonne, where it was not that long ago, those miners are still going to be very, very profitable,” he said. “We expect pretty good dividends from all of them.”
He tipped gold miners Evolution Mining and Regis Resources to offer 4 to 5 per cent yields, despite the headwind of an appreciating Australian dollar for local gold miners.
The confirmation of Joe Biden to the US Presidency and the Democratic Senate victory during the week was good news for Australian lithium, copper, nickel and rare earths miners, who are tipped to benefit from significant policy changes from the new administration.
“Copper is benefiting from the green infrastructure and electric vehicle demand boost,” said Stephane Andre, a portfolio manager at Alphinity Investment Management.
“We believe supply will struggle to meet demand growth. Market copper price expectations for 2021 and 2022 of $US3.2 a pound appear low versus the spot price of $US3.6 a pound.”
Mr Cleary said the mining sector was benefiting from the transition towards more renewable forms of energy.
“We’ve gone from the resources sector being the red-headed step-child when it comes to ESG to being a leading industry within the ESG movement because you can’t decarbonise the world without commodities.”
Mr Andre said S&P/ASX 100 copper miner OZ Minerals should beat the market’s earnings expectations in 2021, with shares printing a record high of $21.20 on Friday after doubling in value over the past year.
Uranium could also enter a bull market in 2021, Tribeca’s Mr Cleary said.
“Things like uranium, which have no carbon footprint, are starting to get some recognition. Oil can double, uranium can go up five times. It’s that structural demand and supply mismatch last year, for example, there was 200 million pounds of [uranium] consumption and 100 million pounds was mined.”
ASX-listed miners named by Mr Cleary as leveraged to an upswing in the uranium price include South Australia-based Boss Resources, alongside Bannerman Resources, which has significant uranium interests in Africa.