3 FTSE 100 commodity stocks to buy at a discount after Evergrande crash

Highlights

  • FTSE listed mining stocks witnessed major correction after the risk of default by China’s Evergrande Group.
  • Fear of collapse in the Chinese economy due to the Evergrande Group led to a correction in the mining sector as investors fear lower demand from China.
  • FTSE 100 listed, Rio Tinto Plc, Anglo American Plc, Polymetal International Plc are trading at a discount with the turmoil in the commodity sector.

Evergrande Group, which has liabilities of over USD 300 million, triggered a major stock market crash globally following a report that the company might default on interest rate payment.

Investors panicked amid the fear of a collapse of one of the largest real estate companies in China that could cause a cascading impact on other companies from the property sector and could also impact the construction activities in China. It could lead to correction in the property prices, adversely affecting the demand for steel and other metals, which is widely used in construction activities.

After the default reports came out, FTSE100 listed metals and mining stocks declined with FTSE 350 industrial metals & mining index trading in the red zone for three consecutive days.

However, investing in the mining stocks after the recent correction could prove to be a wise investment decision as the demand outlook and underlying fundamentals are still intact in the mining sector. 

Let us look at FTSE listed mining stocks that hold good investment opportunities: 

Rio Tinto Plc (LON: RIO)

The company explores key industrial base metals. It is one of the largest mining companies globally, having mining projects at multiple locations.

Rio Tinto share price

(Data source: Refinitiv)

Rio Tinto Plc share price has been down over 21% in the last two months due to correction in the iron ore prices, which has declined over 60% since the high of USD230 per ton in May 2021. The company annually produces over 300 Mt of iron ore, which is a major contributor to its revenue. However, the company is well-diversified and mines for other base metals as well, which will protect the company’s revenue and profitability. Also, bounce back in the iron ore prices with demand recovery in China will benefit the company.

Rio Tinto Plc current market cap stands at £60,422 million as of 24 September 2021. In the last one year, the stock has given a 1.67% return to its shareholder.

Anglo American Plc (LON: AAL)

It is one of the leading mining companies globally, focusing on the exploration of precious and base metals.

Anglo American share price

(Data source: Refinitiv)

The company’s share price has declined over 20% in the last two months despite generating higher revenue in the six months ended 30 June 2021. The company’s revenue was up by 114% at USD 21,779 million, while its underlying EBITDA stands at USD 12,140 million, mainly due to higher commodity prices during the period. However, the company derives a large part of its revenue from iron ore mining which impacted the stock price as investors fear a drop in the company’s revenue due to the recent fall in iron ore prices.

Anglo American Plc current market cap stands at £34,277 million as of 24 September 2021. In the last one year, the stock has given a 41.63% return to its shareholder.

Polymetal International Plc (LON: POLY)

FTSE 100 listed company operates in the exploration and production of precious metals. It has a total of nine mining assets located in Russia and Kazakhstan and is one of the largest gold and silver producers globally.

Polymetal share price

(Data source: Refinitiv)

The company’s stock price is down over 8% since 1 September, and it has corrected over 25% in the last four months. The current share price trades near to the 52-week low of GBX 1,315.50. The stock performance is fundamentally dependent on the prices of gold and silver in the international market. However, in recent times gold and silver prices have corrected after making new high during the start of the pandemic. The company has reported a 12% rise in revenue at USD 1,274 million during the first six months ended 30 June 2021. Also, the company has a consistent dividend payout.

Polymetal International Plc current market cap stands at £6,166 million as of 24 September 2021. In the last one year, the stock has given a negative 22.22% return to its shareholder.

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