I'm not sure how good any of these authorities are at predicting commodity prices in the short term let alone the medium term, but here is Morningstar's latest update FWIW.

I hold NCM, WHC, NHC and CSR (which has a holding in the Tomago Aluminium smelter)

Commodities update: Fourth-quarter 2022

Miners’ fair value estimates generally increased on higher commodity prices with China reopening.

Jon Mills

Commodity prices generally rose over the fourth quarter of 2022 as widespread protests forced China to abandon its zero-COVID-19 policy and reopen. Expectations of increased demand for commodities arising from further stimulus and government financial support for property sector more than offset headwinds as central banks kept raising interest rates to dampen inflation. After updating our commodity price assumptions, we think gold miner Newcrest (NCM) remains the equal cheapest on our coverage list, trading at a 27% discount to our unchanged $31 per share fair value estimate.

Thermal coal prices remain high on supply concerns as the war in Ukraine reinforces the need for energy security. They offset a stronger A$/US$ rate and we retain our fair value estimates for Whitehaven (WHC) and New Hope (NHC) of $12 and $8 per share, respectively, with WHC joining NCM as the cheapest on our coverage list. Along with higher copper and nickel prices and greater marketing earnings from commodity trading given price volatility, thermal coal prices also contribute to Glencore’s fair value estimate rising 8% £650 per share.

Higher mineral sands prices offset a stronger A$/US$ rate and we retain Iluka’s (ILU) fair value estimate of $11 per share. But rising iron ore prices drive higher fair value estimates for BHP (up 10%), Rio Tinto (RIO) (up 8%), Vale (up 19%), Fortescue Metals (FMG) (up 20%) and Deterra (DRR) (up 3%) to $39.50, $107, US$16, $15, and $3.90 per share, respectively. Higher commodity prices offset generally lower production forecasts for Anglo American and our fair value estimate remains £2,800 per share.

We also retain Oz Minerals’ (OZL) fair value estimate of $28.25 per share consistent with BHP’s takeover offer. However, higher copper and metallurgical coal prices drive a 24% increase in our fair value estimate for Teck, to US$31 per share. Stronger aluminium, alumina, and manganese prices contribute to an 10% rise in South32’s (S32) fair value, to $4.40.

No-moat gold-copper miner NCM is attractive at current prices. Higher near-term gold prices are offset by a stronger A$/US$ rate. We now assume gold averages about US$1,810 per ounce from 2023 to 2025 based on the futures curve, up from around US$1,710 previously. However, we make no change to our assumed mid-cycle price of US$1,600 per ounce from 2026, which is based on our estimate of the marginal cost of production. If inflation persists, however, there could be upward pressure on the marginal cost and our mid-cycle assumptions, including for gold, net of any offsetting deflation in producer currencies.

NCM is bedding down its acquisition of Canadian gold mine Brucejack, and we think production will likely rise at its Lihir and Cadia mines. On top of expansions at Red Chris and the transition from Telfer to Havieron, which we think is likely to be developed, the company is also set to benefit from increased copper production over the next decade. We think the current stock price discount to our fair value estimate reflects concern over rising interest rates. The latter are a potential negative for gold prices given it lacks cash flow for its owners and rising yields make bonds relatively more attractive. We also think many investors place less value than we do on NCM’s substantial development pipeline including Havieron, Red Chris, and Wafi-Golpu in Papua New Guinea.

Thermal coal prices remain elevated compared with historical values as the Russia-Ukraine war reinforces the importance of energy security. We now assume thermal coal averages around US$270 per tonne from 2023 to 2025, up from about US$250 previously. However, we think currently elevated prices are unlikely to persist, and continue to assume they decline to our mid-cycle price from 2026 of around US$80 per tonne, which is based on our estimate of the marginal cost of production. We retain our fair value estimates for thermal coal miners WHC and NHC of $12 and $8, respectively. Higher near-term thermal coal prices are offset by a stronger A$/US$ rate and, in WHC’s case, also by lower forecast production. WHC trades at a 27% discount to fair value, while NHC shares are currently around 20% below our fair value estimate. Both companies are generating torrents of free cash flow at current thermal coal prices and returning cash to shareholders via franked dividends and share buybacks. Moreover, as their operating mines are located in New South Wales, they are not directly affected by higher coal royalties recently imposed by Queensland. NHC also owns most of the land on which its New Acland Stage 3 mine will be built, limiting the impact of Queensland royalty hikes on this mine also. However, we think higher Queensland royalty rates mean WHC’s proposed Winchester South metallurgical coal project is likely to be delayed and the Vickery and Narrabri Stage 3 extension projects in New South Wales likely to be preferenced.

We raise our fair value estimate for no-moat Glencore from £600 to £650 per share. Unlike major competitors, Glencore has retained significant coal exposure, arguing coal plays an important role in energy security. As such, Glencore continues to benefit from higher thermal coal prices, with stronger copper and nickel prices also tailwinds. Along with greater marketing business earnings due to ongoing commodity price volatility, these tailwinds more than offset lower cobalt (minus 6%) prices. Glencore shares currently trade at a 14% discount to our fair value estimate, which we think is due to many investors shunning investment in companies exposed to coal.

We maintain our fair value estimate for no-moat ILU of $11.00 per share. ILU continues to benefit from elevated zircon prices, with a stronger A$/US$ rate offsetting a modest increase in our assumed titanium dioxide feedstock prices. We increase our assumed average zircon prices to around US$1,790 per tonne from 2023 to 2025, up from about US$1,660, but maintain our long-term assumed mid-cycle price of around US$1,580 per tonne from 2026. We also increase our assumed average rutile and synthetic rutile prices to about US$1,510 and US$1,360, respectively, from 2023 through 2025, up from around US$1,410 and US$1,260 per tonne, respectively. We still assume mid-cycle rutile and synthetic rutile prices of about US$1,340 and US$1,200 per tonne, respectively, from 2026. With Sierra Rutile spunoff, ILU is concentrating on its Australian operations and extensive growth pipeline. This includes the rare earths refinery under construction at Eneabba and potential West Balranald and Wimmera mineral sands projects. ILU currently trades at about a 5% discount to fair value.

The iron ore miners on our coverage list are benefitting from expectations of improved economic growth and higher steel production in China as the country reopens after abandoning its zero-COVID-19 policy. China accounts for around 65% of the seaborne iron ore trade and its government’s sudden about-turn has seen iron ore prices soar. The Chinese government is also trying to stabilise its ailing real estate sector, including providing financial assistance to both real estate developers and house purchasers to allow them to finish and pay for developments, respectively. We now assume iron ore averages about US$110 per tonne from 2023 to 2025, up from around US$85 previously. However, we make no change to our mid-cycle assumption of US$60 per tonne from 2026, which again reflects our estimate of the marginal cost of production. Higher costs, restrained supply, and depletion at existing mines have inflated and steepened the cost curve but longer-term we think higher production from Vale and the likely development of Simandou will modestly reverse that trend. We also note the population declined in China for the first time in more than 50 years in 2022, a trend which we think is likely to accelerate.

Metallurgical coal is primarily used to create steel via the blast furnace process and so as with iron ore generally tends to also be sensitive to changes in expected global steel production. We also raise our assumed average metallurgical coal prices to around US$260 per tonne from 2023 to 2025, up from about US$220. Metallurgical coal spot and futures prices are in part also being supported by demand for thermal coal, with some coal able to switch between supplying steel-making or electricity generation. We make no change to our assumed mid-cycle price of about US$100 per tonne from 2026, though we note the recent hike in royalties on coal sales by Queensland hamper future supply in the state, which would be positive for longer-term prices. This could be compounded if other jurisdictions follow suit and also raise royalties.

We raise our fair value estimate for no-moat BHP from $36 to $39.50 per share. Higher iron ore and copper prices are the main drivers, partially offset by a stronger A$/US$ rate. Copper prices have been on a tear recently in anticipation of increased demand from China’s reopening along with the government providing financial assistance to its ailing property market. As such, we now assume copper prices average around US$4.00 per pound from 2023 to 2025, up from about US$3.20 previously. However, our assumed mid-cycle price of US$3.00 per pound from 2026 is unchanged, based on our estimate of the marginal cost of production. We also raise our fair value estimate for no-moat RIO from $99 to $107 per share. In addition to higher iron ore and copper prices, RIO is benefitting from higher aluminium prices, These tailwinds more than offset a stronger A$/US$ rate and lower forecast iron ore sales. We now assume aluminium averages around US$2,610 per tonne from 2023 to 2025, up from about US$2,000 previously. We also now forecast average annual iron ore production from the Pilbara operations of about 335 million tonnes (100% basis), down from around 345 million, from 2023 to 2025, with this reduction and ongoing inflationary headwinds leading to modestly higher unit costs. BHP trades at a 24% premium to fair value while RIO trades at a 13% premium to our revised fair value estimate.

We increase our fair value estimate for no-moat Vale from US$13.50 to US$16.00 per share. Vale’s iron ore is generally higher grade than the ore produced by BHP and RIO. But higher operating costs, and higher freight costs given greater distances to China, mean Vale is more leveraged to iron ore prices than its Australian competitors. Higher iron ore, nickel and copper prices are partially offset by lower forecast iron ore production. We now forecast average annual iron ore production of around 325 million tonnes from 2023 to 2025, down from 370 million, driven by a slower increase in production due to Brazilian regulatory and licensing restrictions. The company is also seeking potential minority partners in its base metals business. Vale trades at about a 15% premium to our revised fair value.

We also raise our fair value estimate for no-moat FMG from $12.50 to $15.00 per share. The company is more leveraged to the iron ore price than BHP and RIO given its higher operating costs due to lower quality ore. And given the predominant focus on iron ore, higher iron ore prices more than offset a stronger A$/US$ rate. FMG currently trades at a large 47% premium to our fair value estimate. We think this reflects current iron ore prices, which are elevated relative to the cost curve, as well as enthusiasm around the company’s bold green energy ambitions, where we remain more circumspect. Green energy is a capital-intensive and competitive space.

We increase our fair value estimate for wide-moat-rated DRR from $3.80 to $3.90 per share. While DRR benefits from our higher iron ore price assumptions, it is less leveraged to prices than most iron ore miners given a near-absence of costs as most income is from the Mining Area C iron ore royalty. DRR in undoubtedly high quality, as reflected in our wide moat rating. However, it currently trades at an 21% premium to fair value, which we think is due to investor excitement over China’s reopening and the prospects for higher near-term iron ore prices.

Rounding out our iron ore miners, we retain our fair value estimate for no-moat Anglo American of £2,800 per share. Higher commodity prices are offset by lower forecast iron ore, copper, platinum group metals, and metallurgical coal production along with a stronger £/US$ rate. Anglo American currently trades at around 27% above our fair value estimate, which we attribute to high near-term iron ore and copper prices.

We retain our $28.25 per share fair value estimate for OZL, which reflects the impending BHP takeover. We think the chances of BHP completing the acquisition are high and a competing offer unlikely. Should the deal fall over, all else equal we will likely revert to our increased standalone fair value estimate of $22.50 per share, up from $19 previously. For our standalone fair value estimate, higher copper and nickel prices are partially offset by a stronger A$/US$ rate. OZL trades at a modest 2% discount to fair value, which in our view reflects the high likelihood of the scheme of arrangement with BHP closing.

Our fair value estimate for no-moat Teck Resources increases from US$25 to US$31 per share. Higher copper and metallurgical prices are partially offset by slightly lower forecast 2022 sales from the Elk Valley coal mines. Teck is also more leveraged to changes in commodity prices given its mines tend to be higher cost than many of its major competitors. Like Anglo American, Teck is expanding its copper business and has achieved first ore production at the Quebrada Blanca 2 (QB2) mine in Chile. Once fully ramped up (likely in 2023 or 2024), QB2 will increase Teck’s attributable copper production by around 80%. Teck currently trades at around a 36% premium to fair value, which we think is likely due to investor excitement over higher copper prices.

Along with stronger aluminium prices, higher copper and metallurgical coal prices are also helping no-moat diversified miner S32, partially offset by a stronger A$/US$ rate. We raise our fair value estimate from $4.00 to $4.40 per share. We also now assume higher manganese prices (up 13%) based on spot. S32 shares currently trade close to fair value.

hopefully this time with tables - thanks @Bear77 !

@Bear77 and vanadium...  one of the reasons I've been interested in NMT in my SMSF.  See they have just released very positive results from a scaled-up JV pilot on Vandium recovery from slag in the last week or so which has give the stock a nice bump - along with a solid record of execution on commitments and playing to their strategic strengths.  I continue to like NMT which I first bought in my SMSF July 2017, adding more over the years as the price trickled down a little.  Have paid close to 5% div through that period and now my holding up 95% and I'm positive on what's in store.

Very interesting listening to people who know stuff in areas I know nothing. Not sure if this is the best thread for this, however...

Given that picking any particular Lithium miner is seemingly fraught, I was wondering if anyone knows if there is a particular spade seller set to benefit from the Lithium play?

Presumably there are certain pieces of equipment, skills or services particular to lithium mining that will be in high demand. If we cant pick the miner, perhaps its possible to pick the second order winner/s? 

FWIW I hold IGO as I like the thought of a value add with the processing and the additional nickel exposure.

I have spent much of my career in oil and gas at a senior level, and invest in this space from time to time, albeit recognising that timing is important because the industry does not return its cost of capital over the long term. Last year when WTI hit -$37/bbl I did a once-in-a-decade load up, and achieved nice returns, which I have largely now exited. I will post more in the future on my resources philiosophy. Current real world holdings are SXY, OSH and WPL,... SXY on Strawman. Research notes to follow. I never invest in small cap, pure play exploration stocks. Unless you have deep technical (inside) knowledge, it is little better than gambling, although you can win the lottery. That's not my investing style.
 

Currently, am also interested in Nickel and Copper because of their importance in the next 30 years of re-wiring the economy. Have taken small initial position in C6C, MCR and OZL. Lithium is not for me as it's harder to value resource in the ground.