Five Mining Stocks to Watch in 2025 Following China’s Economic Stimulus

China’s recent decision to ramp up its fiscal and monetary support has caught the world’s attention, especially in Australia. As our largest trading partner, China’s economic moves often have a direct impact here, particularly when it comes to resource exports. With a focus on boosting domestic consumption and jumpstarting growth, these policies could create opportunities for Australian exporters, but it’s not all smooth sailing. What’s Happening in China? China’s leaders have announced plans to adopt “more proactive” fiscal policies and “moderately loose” monetary measures. This means we could see interest rate cuts and adjustments to banking requirements to free up cash flow and support struggling sectors like real estate. The bigger picture? They’re aiming to get consumers spending again. With challenges like a weak property market and rising debt holding back growth, China is trying to stabilize its economy and soften the blow of global uncertainties, including trade tensions with the U.S. How Could This Affect Australia? A Boost for Resource Exports: For Australia, China’s stimulus often translates into higher demand for key commodities like iron ore, coal, and gas. If their construction sector picks up steam, we’ll likely see a surge in demand for iron ore, which is central to steelmaking. Metallurgical coal could also benefit from this uptick. Cautious Optimism: But let’s not get carried away. The Reserve Bank of Australia (RBA) has already indicated that the impact this time around might not be as dramatic as we’ve seen in the past. Issues like capacity limits in our mining sector and a general hesitation to invest in big expansions could cap how much we can benefit from China’s renewed appetite for resources. Trade Ties Are Looking Up: It’s not just about iron and coal. Australian exports of beef, wine, and seafood are bouncing back, showing that our trade relationship with China is improving after some rocky years. Agreements like the China-Australia Free Trade Agreement are also making it easier for our goods to compete in the Chinese market. Why It Matters Globally: China’s policy shifts don’t just affect Australia, they ripple across the global economy. By boosting consumption and liquidity, China could help lift demand for commodities worldwide, benefiting exporters like us and adding some stability to regional economies. The Bottom Line: China’s latest stimulus push is an opportunity for Australia, especially for resource exporters. However, it’s unlikely to replicate the massive booms we’ve seen during previous stimulus periods. While there’s potential for growth, challenges like limited mining capacity and broader global economic headwinds might remain. Commodity Price Outlook for 2025: Key Trends and Stock Opportunities As we look ahead to 2025, base metals are expected to experience a slower recovery, with global economic growth facing several challenges. The ongoing impact of higher tariffs, particularly between the U.S. and China, is likely to continue weighing on the global economy. Additionally, China’s GDP growth is forecasted to slow to 4.2% in 2025 due to domestic headwinds and reduced policy support for electric vehicles. Despite these challenges, rising capex costs and incentive pricing should provide some support across the broader commodities market. However, we anticipate iron ore prices to remain relatively subdued, given high inventories in China and tighter margins at steel mills. In the crude oil market, geopolitical tensions and the potential for political dealmaking will likely balance supply risks, with trade concerns and evolving production dynamics contributing additional uncertainty. The coal and uranium markets present more mixed prospects. Coking coal demand is expected to be driven by strong steel production in India, supported by infrastructure investments. Thermal coal prices are likely to experience a temporary increase due to seasonal winter restocking, followed by normalization later in the year. In uranium, we anticipate price volatility driven by political and policy shifts, though long-term demand remains strong, particularly in the U.S., where consumption is expected to rise significantly by 2035. As we approach 2025, commodity markets will be shaped by a combination of economic, geopolitical, and policy factors, offering both challenges and opportunities. Given these projections, we have identified five stocks that we believe are worth considering as we enter 2025. Let’s take a closer look at these opportunities and discuss potential entry points. Lynas Rare Earths Ltd (ASX: LYC) – Upside Potential: +35% Lynas Rare Earths Limited (ASX: LYC) has positioned itself as a key player in producing separated rare earth materials outside of China, with a strong presence in markets across East Asia, Europe, and North America. After a period of consolidation below $6 per share, we’ve seen a recent rebound in LYC shares. This isn’t entirely unexpected, considering the company’s steady growth and its important role in the global manufacturing supply chain. Despite facing some pressure from rare earth prices, Lynas is making solid progress with its expansion plans, which bodes well for the long-term. Looking at Q1 FY25, rare earth prices remained fairly low, though we did see a slight uptick in NdPr prices towards the end of the quarter. The average NdPr market price came in at $48/kg ex VAT. Lynas generated sales revenue of $120.5 million and sales receipts of $127.5 million. As we expected from their FY24 Annual Results, Lynas managed production levels in line with market demand. They also had about 100 tonnes of NdPr still at port at the quarter’s end, which will be included in Q2 FY25 sales. Overall, they produced 2,722 tonnes of rare earth oxide (REO), including 1,677 tonnes of NdPr, and inventory levels remained steady. On the growth front, Lynas is continuing to advance its key projects. The Mt Weld expansion is progressing well, with the Stage 1 Concentrate Dewatering circuit now in operation. Stage 2, which focuses on the grinding and flotation circuits, is on track to be completed by the end of FY25. Meanwhile, the Kalgoorlie Rare Earths Processing Facility is ramping up production, with a focus on improving reliability, optimizing MREC quality, and reducing costs. MREC is still being shipped from Kalgoorlie to Lynas Malaysia for further processing, and the company is clearly committed to improving efficiency at every step. When we look at the company’s valuation, we’ve used a 10-year discounted cash flow EBITDA Exit Model, applying a discount rate of 9.8% and a terminal EBITDA multiple of 12.4x. With projected revenue growth of 15.4% annually over the next decade, we’ve determined a fair value of $9.47 per share, suggesting an undervaluation of around 35.9%. Given Lynas’ strong fundamentals, steady progress on growth projects, and overall market potential, we see a solid opportunity here and recommend a “buy” at current levels. Incitec Pivot Ltd (ASX: IPL) – Upside Potential: +16.5% Incitec Pivot Limited’s (ASX: IPL) FY24 results paint a picture of a company in the middle of a major transformation, and there’s plenty to be optimistic about. While the headline statutory loss of $311 million might grab attention, it’s important to note that this was driven by one-off costs like non-cash impairments and restructuring expenses. When you strip out these items, IPL delivered $580 million in EBIT, supported by strong performance across its core businesses. Even more encouraging is the 18% underlying EBIT growth after adjusting for re-basing items. This shows that the operational changes IPL has been making are starting to pay off. The Dyno Nobel Asia Pacific segment was a real standout, delivering a record EBIT with 36% growth year-on-year. This came from strong customer relationships, efficiency improvements, and the rollout of innovative technologies like electronic detonators. Over in Dyno Nobel Americas, underlying performance improved by 15%, thanks to better pricing discipline and cost management. The Fertilisers Asia Pacific segment had some challenges due to closures and reduced manufacturing, but the Distribution business delivered its best results yet, proving that IPL can adapt and thrive even in a shifting landscape. Looking ahead, IPL’s future feels bright. The company is sharpening its focus on becoming a global leader in explosives while thoughtfully managing the separation of its Fertilisers business. Sustainability is also front and center, with projects like the Moranbah N2O Tertiary Abatement already reducing emissions, and more improvements planned in the US. CEO Mauro Neves struck an optimistic tone, pointing to the company’s progress and highlighting opportunities for further growth in FY25 through better cost management, stronger margins, and increased technology adoption. On the valuation side, we took a conservative approach using a 10-year Discounted Cash Flow (DCF) Growth Exit model with an 8.8% discount rate. Even with flat revenue assumptions, IPL’s fair value comes out at $3.67 per share, which suggests the stock is undervalued by around 16.5%. With a solid plan in place and a clear path for growth, we believe IPL offers a compelling long-term “buy” opportunity. Perseus Mining Ltd (ASX: PRU) – Upside Potential: +39% Perseus Mining Limited (ASX: PRU) continues to impress with its strong operational performance and rock-solid financials. The company’s three gold mines in West Africa are firing on all cylinders, producing over 121,000 ounces of gold in the latest quarter. Notably, its safety metrics are a standout, with a TRIFR of 0.97—well below the industry average. On the financial side, Perseus’s notional cash flow hit $127 million for the quarter, and the company is making steady progress on its growth projects, like the CMA Underground project and the Nyanzaga Gold Project, which could unlock even more value in the future. When we dive into the operations, Yaouré is leading the charge, contributing over 56,000 ounces of gold despite elevated costs from waste stripping. Edikan is holding steady, delivering $61 million in notional cash flow with a strong cash margin of $1,276 per ounce, thanks to a solid bump in realized gold prices. Meanwhile, Sissingué, while dealing with higher costs and lower production, still managed to add value to Perseus’s portfolio. All in all, the company is balancing challenges and opportunities well, keeping its operations on track to meet its guidance for CY24. Financially, Perseus is in a league of its own. With $643 million in cash and bullion, zero debt, and an additional $300 million in undrawn capacity, the company has plenty of firepower to fund growth and handle any bumps in the road. Its strategic investments, like the 19.9% stake in Predictive Discovery Limited, show that Perseus is thinking ahead, positioning itself to benefit from promising assets like the Bankan Gold Project. On top of that, the recently approved Nkosuo deposit at Edikan adds to the company’s pipeline of future growth opportunities. From a valuation perspective, we see a lot of upside potential here. Based on our Discounted Cash Flow Revenue Exit model, we estimate Perseus’s fair value at $3.91 per share, implying it’s quite undervalued. We’re working with a conservative approach, factoring in limited revenue growth over the next five years, yet the numbers still tell a bullish story. With its strong fundamentals, clear growth path, and disciplined financial management, we believe Perseus is well-positioned to deliver long-term value, making $3.91 a realistic and compelling target price. Yancoal Australia Ltd (ASX: YAL) – Upside Potential: +87% Yancoal Australia Limited (ASX: YAL) is a key player in the coal industry, with operations spanning New South Wales, Queensland, and Western Australia. The company runs five mines and manages another five, maintaining a strong production record. In the September Quarter 2024, Yancoal posted solid results, including a $430 million boost to its cash balance, bringing the total to a healthy $1.98 billion. The company also saw a significant increase in production, with ROM coal output rising by 26% from the previous quarter. This increase aligns with Yancoal’s strategy to leverage its high-quality mine portfolio to ramp up output. On the pricing front, Yancoal’s average realised coal price for 3Q 2024 was A$170/tonne, down slightly from the previous quarter. This was due to a 19% drop in metallurgical coal prices and a 4% decrease in thermal coal prices. Despite these price changes, Yancoal is optimistic about the coal market. Demand for thermal coal remains stable, strengthened by stronger imports from countries like Japan, Korea, and China. However, the metallurgical coal market has faced some challenges, with softer steel demand affecting prices. Yancoal has managed to maintain relatively strong pricing through strategic blending and optimization efforts. When it comes to asset performance, the company has done well, even in the face of some weather disruptions. Mines like Moolarben, Mount Thorley Warkworth, and Hunter Valley Operations all saw higher ROM and saleable coal production, thanks to smart operational decisions. Yancoal’s ability to manage weather-related delays and improve wash plant efficiency has kept things running smoothly. The company’s ongoing investment in its mines and exploration projects, such as the development of the Stratford Renewable Energy Hub, further supports its growth prospects. Looking at the numbers, we believe Yancoal shares are trading below their true value. Using a 5-year Discounted Cash Flow Revenue Exit Model, we estimate the stock’s value at $11.97, suggesting a potential upside of 87%. This forecast is based on conservative growth assumptions, with annual revenue growth of 1% to 4.9% over the next five years. With strong operational performance and a solid market outlook, we see Yancoal as an attractive investment opportunity, and our target price is set at $11.97 per share. Boss Energy Ltd (ASX: BOE) – Upside Potential: +29% Boss Energy Ltd (ASX: BOE) is making great strides at its Honeymoon Uranium Project in South Australia. The ramp-up is going smoothly, with the first production column hitting nameplate capacity, the second column now up and running, and the third one under construction. These milestones keep Honeymoon on track to meet its production target of 850,000 lbs of U3O8 for FY25. Plus, the company recently shipped its first batch of 57,000 lbs of U3O8 and received $23.4 million from a sales contract, which is a big step forward in generating cash flow. The company’s 30% stake in the Alta Mesa Project in South Texas is also moving forward. Production has started, and by 2026, Alta Mesa is expected to reach a steady output of 1.5 million lbs of U3O8 annually, with Boss’s share being 450,000 lbs. The grand opening, attended by George W. Bush, highlighted the project’s importance. Additionally, the drilling results coming from Alta Mesa continue to exceed expectations, showing the potential for even greater capacity as operations ramp up. On the financial side, Boss is in a strong position. With no debt and $244.9 million in liquid assets, including uranium inventory, the company is well-equipped to navigate any market changes. Its sales strategy, focusing on market-linked contracts, ensures the company can benefit from rising uranium prices while maintaining financial security. This strategy positions Boss well as the demand for uranium grows, driven by the expanding use of nuclear power. Looking ahead, the uranium market looks increasingly promising. There’s a surge in demand for clean, reliable energy, with more industries eyeing nuclear power as a solution. Geopolitical concerns and supply chain disruptions are also tightening the supply available to Western utilities. Boss Energy is well-positioned to meet this demand, with its growing production and uncontracted uranium ready to fill the gap.