10 Mining Stocks With Strong Buy Ratings: Updated

Editor's Notes: Charts and text have been updated with Thursday's close.

NEW YORK ( TheStreet) -- Posco ( PKX), MAG Silver ( MVG), Sterlite Industries ( SLT), Puda Coal ( PUDA), Steel Dynamics ( STLD), Barrick Gold ( ABX), Peabody Energy ( BTU), VALE ( VALE), Rio Tinto ( RIO) and GoldCorp ( GG) received analyst buy ratings in the range of 79%-100%. These stocks have an upside potential of up to 71%, based on analysts' consensus estimates of 12-month price targets.

Base metals kicked off to a good start this week due to heavy stocking and strong industrial demand. A descent in HSBC Flash China Manufacturing Purchasing Managers' Index in February to seven-month lows could alleviate inflationary pressures and push demand revival. Demand surge for commodities worldwide ensured upswings in most metal prices. Besides, a recovery in developed economies and a sustained push from emerging markets would augur well for mining companies.

We have identified 10 mining stocks that received average analysts' buy ratings of 90%, while Posco, Sterlite, Puda and Mag Silver have 100% buy ratings. Analysts foresee further upsides from present levels. The selected stocks have the potential to deliver 18%-71% return over the next one year and have been picked from U.K., China, India, Canada, the U.S. and Brazil.

The stocks are stacked in terms of upside, great to greatest.

10. Vale ( VALE) is a metals and mining giant producing iron ore and iron ore pellets.

During February 2011, Vale announced commissioning its first pelletizing plant in its industrial complex in Oman, which also includes a deep-water bulk jetty.

Bulk materials comprising iron ore, pellets, manganese ore and ferro-alloy contributed 77.7% to third-quarter operating revenue, while sales to Asia contributed 56.4% toward total revenue. In recent quarters, bulk material sales and sales to Asia trended higher.

Operating revenue jumped 110% year-over-year to $14.5 billion. Operating income and net income rose by a staggering 200% each on robust revenue. Margins were impressive, with operating margin climbing 56%, up 8% from the second quarter.

The stock gained 23% during the last one year and is trading at 11.1 times its estimated 2011 earnings.

9. GoldCorp ( GG) is among the world's fastest growing senior gold producers with operations throughout the Americas.

During the third quarter, net profit surged 65% year-over-year to $231.5 million on lower cash costs. Revenue surged 28% year-over-year to $886 million during the September quarter on robust gold sales.

For the third quarter, Goldcorp reported higher cash flows before working capital in the order of $471 million on production of 596,200 ounces and lower cash costs.

Exuding optimism about future gold production, Goldcorp's CEO said in a press statement, "We have begun commissioning of the high pressure grinding roll circuit, representing the completion of Peñasquito construction and the final component of designed 130,000 tonne throughput capacity, which we expect to reach early in 2011. The expected completion of the Andean Resources acquisition will add Cerro Negro, another large, high-quality gold asset in Argentina."

Goldcorp has a strong balance sheet. The stock received buy ratings of 83% and as per consensus estimates; the stock is poised to deliver 36% in the next one year. The stock is trading at 21.5 times its estimated 2011 earnings.

8. Peabody Energy ( BTU) is a coal company with business interests in the U.S. and Australia.

Net revenue for 2010 increased to $6.9 billion from $850 million, driven by higher volumes and pricing from mining operations in both the U.S. and Australia. Sales volume for 2010 totaled 246 million tonnes compared with 243.6 million tonnes in 2009.

Higher contributions from mining operations improved gross profit to $1.8 billion, compared with $1.3 billion in the prior year. Operating profit rose 57% year-over-year to $1.33 billion, resulting in significant cash flow generation of $1.1 billion. Overall, net income rose 76% year-over-year to $805 million.

Commenting on the better-than-expected results, Gregory H. Boyce, Peabody Energy CEO, said, "Peabody delivered the second best year in company history, with record safety performance, strong cost containment and margin expansion in every operating region."

The stock is trading at 13.0 times its 2011 earnings. Of the 26 analysts covering the stock, 22 rate a buy. The stock appreciated 39% during the last one year and is likely to gain 18% over the next one year, based on consensus estimates.

7. Barrick Gold ( ABX) engages in the production of gold and other associated activities like exploration and mine development.

Fourth-quarter adjusted net income rose 57% to $947 million, compared to $600 million during the same quarter last year, riding on buoyant gold sales and higher realized prices for both gold and copper.

Rising gold prices and lower cash costs supported Barrick's cash margins -- fourth-quarter cash margins jumped 35% year-over-year to $882 per ounce and net cash margins rose 29% to $1,042 per ounce.

Barrick's financial position is strong, including a quarter-end cash balance of $4 billion, low net debt of $2.5 billion and robust operating cash flow generation. Besides, commissioning of the Pueblo Viejo and Pascua-Lama projects would improve gold production to 9 million ounces over the next five years.

Of the 28 analysts covering the stock, 24 rated it a buy. The stock gained 36% during the last one-year and is trading at 12 times its estimated 2011 earnings.

6. Steel Dynamics ( STLD) is the fifth-largest producer of carbon steel products.

Net profit for 2010 stood at $141 million on net revenue of $6.3 billion, in comparison to a net loss of $8 million on net revenue of $4 billion for 2009.

During the fourth quarter, the company announced net profit of $8 million on net revenue of $1.5 billion. In comparison, fourth-quarter 2009 net profit stood at $27 million on net revenue of $1.2 billion. A non-cash asset impairment charge of $13 million related to the company's fabrication operations lowered fourth-quarter earnings.

Fourth-quarter steel shipments were 1.3 million tonnes, up 13% compared to fourth-quarter 2009.

Looking ahead, Keith Busse, Steel Dynamics CEO, said, "With the expected slow but continual improvement in the U.S. economy, we could see increased volumes compared to 2010 for both our steel and metals recycling operations. Our current expectation is that steel consumption should grow in 2011 in the automotive, transportation, energy, industrial and the agricultural and construction equipment sectors."

The stock is trading at 11.3 times its estimated 2011 earnings.

5. Rio Tinto ( RIO) is a global metal and mining player dealing in aluminum, copper, coal and iron ore. Rio sources bulk production from Australia and North America and operates in more than 50 countries.

Rio announced record underlying earnings of $14 billion in 2010, up 120% from 2009. Net debt reduced to $4.3 billion in 2010 from $19 billion in 2009.

Rio Tinto recently made an off-market takeover offer to acquire all the outstanding shares of Riversdale Mining at A$16 per share cash offer. The company divested the remaining 48% stake in Cloud Peak Energy ( CLD) during December 2010.

On future growth, the company's CEO Tom Albanese said, "We will continue to expand our tier-one assets following the $12 billion of major capital project approvals since the start of 2010. We have embarked on Australia's largest fully integrated mining project through the expansion of our iron ore business in the Pilbara toward 283 million tonnes a year by 2013, and continue to finalize studies into the phase two expansion to 333 million tonnes a year by 2015."

The stock outperformed during 2010, gaining 33% during the last one year, and is currently trading at 7.2 times its 2011 earnings.

4. Puda Coal ( PUDA) is located in China's Shanxi province and supplies high-grade metallurgical coking coal that is used to produce coke for steel manufacturing in China.

Puda's annual coking coal capacity is 3.5 million metric tons. The company recently moved upstream into coal mining as an acquirer, and the Shanxi provincial government has appointed Puda as a consolidator of 12 coal mines; the company foresees higher margins from these mines.

During the third quarter, Puda reported a 60% year-on-year increase in total revenue, driven by higher sales volume and average selling prices for cleaned coal. Net income rose 86% for the quarter. Gross margin stood at 10.7%, improving 1.1% from the same quarter of last year.

The company's future prospects are secure, as China's burgeoning electricity demand would require massive volumes of coal. The stock is trading at 9.9 times its 2011 earnings with 100% analyst buy ratings.

3. Sterlite Industries ( SLT) is a global player in the metals and mining sector, with a diversified portfolio consisting of non-ferrous metals.

Hampered by regulatory restrictions at its Tuticorin and Orissa projects, the stock has been underperforming the broader market indices, down 12% in the last year.

Sterlite completed the acquisition of 74% interest in Black Mountain Mining from Anglo American Group in South America. The acquisition includes Black Mountain zinc mine and Gamsberg zinc project, the company said in a press statement. Furthermore, the acquisition of Skorpion zinc mine in Namibia from Anglo American for around $700 million has also been concluded.

On the operational front, production ramp up at its new smelters will augment volumes. Strong contributions from its power and zinc segments could improve earnings profile.

Sterlite has a strong balance sheet with cash and cash equivalents of $6 billion, which can be used for organic and inorganic opportunities.

The stock is currently trading at 11.2 times its estimated 2011 earning.

2. MAG Silver ( MVG) is a silver mining company operating in the Mexican Silver belt.

MAG announced an independent updated mineral resource estimate for the Juanicipio Property, which is a standalone underground silver mine owned by Minera Juanicipio, a joint venture between Fresnillo and MAG.

The mine has around 5.2 million tonnes containing 110.8 million ounces of silver and 321,300 ounces of gold that can be excavated during its lifetime, as per a company report. Regarding the estimate release, Dan MacInnis, MAG's president and CEO, said in a press statement, "We are pleased, but not surprised, to have added over 2 million tonnes and more than 27 million ounces of silver and 111 thousand ounces of gold to our Indicated Resources."

MAG Silver maintained a strong cash position of $46.5 million at the end of the third quarter. The stock rose 65% in the last one year and analysts' consensus suggests an upside of 64% over the next one year.

1. Posco ( PKX) is a Korea-based integrated steel producer.

During 2010, the company achieved its highest steel production volumes to date. Production volumes stood at 33.7 million tonnes, up 14% year-over-year, following capacity expansion. During 2010, Posco launched operations at its newly opened or expanded facilities, such as the Gwangyang steel plate factory and refurbished Pohang Furnace.

For full-year 2010, net revenue increased 20% year-over-year. Through low-cost material use and byproduct recycling, operating profit increased 60% in 2010, compared to the prior year.

Going ahead, Posco plans to maintain maximum production from its new and expanded facilities, starting construction at its Indonesian integrated steelworks, India cold-rolled plant, Turkey stainless cold-rolled plant, and by three overseas processing centers each in China and India, in addition to the 48 centers currently operating in 14 countries. The stock is trading at 8.3 times its estimated 2011 earnings.

>To see these stocks in action, visit the 10 Mining Stocks With Strong Buy Ratings portfolio on Stockpickr.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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