Hey guys, this is what MorningStar Premum had to say as of 21st April 2023, take there due diligence with a grain of salt:

Miners: FVEs Largely Unchanged as Generally Lower Commodity Prices Offset by Weaker Aussie Dollar

April 21st 2023, 12:00 am AEST

Miners: FVEs Largely Unchanged as Generally Lower Commodity Prices Offset by Weaker Aussie Dollar

Commodity prices have generally been less volatile so far in 2023 compared with 2022. Excitement over China reopening has moderated, with concerns over the stability of the financial system coming to the fore.

After updating our commodity price assumptions, we think thermal coal miner Whitehaven Coal is the cheapest on our coverage list. It trades at a 29% discount to our AUD 9.80 per share fair value estimate, which we've marginally lowered by 2% due to the New South Wales coal reservation scheme. Although thermal coal prices have fallen, they remain high compared with historical levels on supply concerns as the war in Ukraine reinforces the need for energy security. However, they are offset by a weaker AUD/USD rate and we retain our fair value estimate for fellow thermal coal miner New Hope of AUD 6.30 per share.

Along with lower nickel and zinc prices, lower thermal coal prices also contribute to Glencore's fair value estimate falling 5% to GBX 530 per share. It recently made a proposal to buy Teck, and our fair value estimate for Teck remains USD 40 in line with Glencore's proposal.

We recently reinitiated coverage of gold miners Newmont, Barrick, Agnico Eagle, and Kinross with fair value estimates of USD 54, USD 21, USD 53, and USD 5.20 per share, respectively. In line with Newmont's higher indicative offer for Newcrest, we raise our fair value estimate for the latter by 3% to AUD 33.

A weaker AUD/USD exchange rate drives a modest 5% increase in Iluka's fair value estimate to AUD 11 per share. Foreign exchange offsets lower iron ore prices and we maintain our fair value estimates for BHP, Rio Tinto, Fortescue, and Deterra at AUD 39.50, AUD 107, AUD 15, and AUD 3.90 per share, respectively. However, we lower our fair value estimate for Vale to USD 14.50, driven by lower iron ore and nickel prices. A stronger GBP/USD rate drives our fair value estimate for Anglo American down 4% to GBX 2,700 per share.

We maintain our fair value estimate for South32 of AUD 4.40.

Whitehaven aggressively expanded production through the commodities boom, particularly with the flagship Maules Creek mine starting in 2015. The strong recovery in coal prices from 2016 generated much-needed cash flow. Maules Creek adds lower-grade metallurgical coal to Whitehaven's product mix, which attracts a premium to thermal coal. Narrabri is Whitehaven's other major mine and is a low-cost, high-capacity underground thermal coal mine. The company aims to increase output at Maules Creek and Narrabri, which is important to unit costs, but coal prices are an important factor for valuation as well. Here the large supply of relatively high-cost coal from China should support thermal coal prices. Net debt of AUD 809 million at end June 2021 saw Whitehaven in a somewhat weakened financial position, but with greatly improved coal prices, we expect meaningful near-term improvement.

Bear Points

The company's return on invested capital is likely to be depressed in the long term.Whitehaven is exposed to Asian energy and steel demand. We think China's demand for steel has peaked and will be structurally challenged as the economy transitions from investment-led to consumption-led growth.Coal is losing its social licence. Whitehaven may struggle to develop its Vickery and Winchester South Mines, while thermal coal plants may be retired more quickly than we expect due to the world attempting to decarbonise and get to net zero by 2050.

Bull Points
Existing coal producers, particularly those like Whitehaven that produce high-energy, high-quality coal, could benefit from future supply potentially being dampened as new coal mines face more difficulties gaining approval.Whitehaven's Maules Creek and Narrabri mines will likely provide a core of low-cost production, while Maules Creek brings a meaningful proportion of metallurgical coal.With projects including the Vickery and Winchester South deposits, Whitehaven has a strong pipeline of production growth, including coking coal, for years to come.