As the prices of gold, copper, aluminum, and other commodities continue to rise, mining companies are generally trading at expensive valuations. However, certain segments still offer relatively undervalued opportunities. Although gold has retreated from its highs, it remains supported by multiple macroeconomic factors. Investors may consider relatively undervalued stocks such as Whitehaven Coal, Albemarle, Mineral Resources, and Iluka Resources. Mining companies generally maintain strong balance sheets, with gold companies performing particularly well during the recent gold bull market.
Affected by the Iran war, liquefied natural gas shipments from the Middle East have significantly decreased. Southeast Asian countries have turned to coal-fired power generation to meet energy demand, driving thermal coal prices up by 23%. The war has also disrupted aluminum production in the region, with aluminum prices rising 13% from the previous quarter. Lithium prices, driven by rising demand and stagnant supply growth, continue to recover from recent cyclical lows. Despite a decline in China’s steel production, strong import demand has pushed iron ore prices up modestly this quarter.
Copper prices are largely unchanged, trading at around USD 6 per pound, near historical highs. The gold market is taking a breather after an epic bull run, with prices largely flat, but gold has more than doubled since the start of 2024. In contrast, metallurgical coal prices fell 8%, primarily because weak demand outweighed supply disruptions caused by severe weather in Queensland. Overall, compared with historical levels and cost curves, most major mined commodities are trading at high prices.
Spot gold is currently down 15% from its all-time high, affected by the price pullback following the Iran war. However, gold prices remain elevated due to strong investment demand driven by tariff concerns, deteriorating fiscal deficits in Western governments, geopolitical tensions, a weaker US dollar, and lower real interest rates. Lower real interest rates are favorable for gold, reducing the opportunity cost of holding it for investors.
Whitehaven Coal (ASX: WHC): Driven by rising thermal coal prices resulting from LNG supply disruptions caused by the Iran war and the shift from natural gas to coal by Southeast Asian customers, Whitehaven, which has no economic moat, stands to benefit. The stock is undervalued by approximately 15%. Limited new supply of thermal and metallurgical coal due to ESG concerns and regulatory opposition may support long-term price upside.
Albemarle (NYSE: ALB): Albemarle, a narrow-moat company, is slightly undervalued. Lithium prices are expected to rise from 2025 to early 2026 as demand outstrips supply. The market is expected to remain nearly balanced in 2026, with a long-term lithium price forecast of USD 20,000 per metric ton. Albemarle will also benefit from lower unit cash costs driven by higher production volumes in the coming years, as well as reduced capital expenditures due to the deferral of growth projects amid low lithium prices.
Mineral Resources (ASX: MIN): Mineral Resources, which has no economic moat, is trading about 10% below fair value. Earnings are expected to rise as the low-cost, long-life Onslow iron ore mine ramps up production and lithium prices increase. With capital expenditures slowing, a significant improvement in cash flow and a substantial reduction in financial leverage are anticipated.
Iluka Resources (ASX: ILU): Iluka Resources is modestly undervalued, as the cyclical downturn in mineral sands shows signs of improvement, and the balance sheet strengthens through inventory reduction, lower operating costs, and reduced capital expenditures by placing some operations on care and maintenance. Structural challenges in high-quality zircon and titanium dioxide feedstocks support long-term prices.
