Expecting European miners to generate record cash flows in the first half of 2022, Goldman Sachs (NYSE:GS) said it is “bullish” about the sector.
The investment bank highlighted five ‘buy’ ideas, including upgrading Rio Tinto PLC (LSE:RIO).
The others were Glencore PLC (LSE:GLEN), Anglo American PLC (LSE:AAL), Norsk Hydro and Lundin.
“We are bullish”, the mining analysts said, in a preview of the first-quarter reporting season.
Miners are expected to be supported by a strong macro backdrop during the period, leading to underlying profits (EBITDA) of circa US$80bn and sector free cash flow (FCF) of around US$40bn, implying a roughly 10% FCF yield.
“Our optimism also extends beyond 1Q earnings,” the analysts said, highlight “a multi-year unprecedented bull cycle in metals underway, with most metals in short supply”.
On spot metals prices, the EU mining sector is trading at around a 20% FCF yield, “a meaningful discount vs history”.