The LiveWire Live investing conference last week included James Hawkins of the L1 Capital Catalyst Fund.
He told the audience that one area he’s looking for an opportunity is the resource sector. James doesn’t believe that the recent outperformance of commodities means all the returns are over.
In his words, “it depends on which commodity you’re talking about” and “which company”. He also cited increasing dividends from the Materials sector as a positive sign in general.
For example, while Hawkins likes the copper thematic, many of the associated companies look fully priced to him currently.
James Hawkins reveals where he sees value in mining stocks
Hawkins looks for miners that have done their capital expenditure in the last several years and are set to reap the benefits of this previous investment via volume growth. He then analyses its commodity outlook and balance sheet.
This sets the stage for earnings growth to be materially higher in 2 years. One of those is Mineral Resources (ASX:MIN). Hawkins sees a tailwind from rising lithium volumes, in particular.
This news service adds that another tailwind is its iron ore division. There’s no spectacular news around steel, but demand in 2026 is still set to be higher than 2025.
Another backdrop to the industry is that major iron ore miners over the last decade have consumed reserves at a faster pace than they are replenishing them, according to Wood Mackenzie.
They are also grappling with a decline in ore grades, which means higher volumes are needed for the same level of iron units.
Iron ore tailwinds for Minerals Resources?
Analysts at Wood Mackensie say new investment is only going to keep supply flat as ageing deposits are replaced. The industry is “working harder to stand still”, says senior research analyst Mayank Maheshwari.
BreakWave Advisors adds that, despite sector headwinds, “In the short term, however, iron ore buying is showing signs of strengthening as Chinese mills rebuild inventories ahead of the National Day Golden Week holiday to maintain blast-furnace operations through the break.”
They add that Australian iron ore carries an advantage from lower freight costs compared to Brazil or Guinea. MIN may see a tailwind from this.
Write to Callum Newman at Mining.com.au
Main image: Unsplash
