JPM-JPM Mining Daily Iron ore 百分之0.5, Nickel 百分之1.2...-20251126

The combination of China supposedly banning some BHP iron ore cargoes, additionalSamarco provisions, and BHP making another attempt at acquiring Anglo, have all weighedon the share price. Meanwhile, the RIO story has improved with its lithium pipeline movingfrom a negative to a positive (given the demand / price bounce), and the Capital Markets Dayon December 4 potentially providing positive news on capital and cost discipline. Thequestion now is, can BHP catch up against RIO following its relatively lousy share priceperformance? We think it can, given there is now a marked difference in the valuations andthat the underperformance has largely been sentiment-driven rather than any structuralvaluation impact. We do expect RIO’s CMD to be positive, but from a share price perspectiveit could be an anti-climax, due to a lack of material changes to the outlook. Ultimately, wesee the spread between the two stocks as cyclical, with sentiment towards BHP at a low pointand RIO now back in favor. This is something we recommend investors take advantage of,as the likelihood is that the two stocks will once again converge over time, given they are similar investment propositions (roughly 60/40 iron ore/base metals). There is no firmcatalyst, but it’s likely to come down to something unforeseen that changes sentiment againfor RIO (perhaps iron ore guidance disappoints at the CMD), or the market moves back infavor towards BHP with any copper rally, given it has significantly more copper priceexposure in the short term (~40% vs RIO at 25%). As we highlighted in Greg’s Base MetalOutlook, he sees more upside for copper into next year (to $5.50/lb) vs aluminium at (at $1.32/lb). We are OW on both stocks but reiterate our preference towards BHP.