Berenberg prefers gold miners after recent de-rating

"From a mining standpoint, the broad macroeconomic picture is tricky, with the Chinese economy yet to show meaningful signs of improvement and [...] the wider energy transition narrative being delayed. We remain upbeat about the long-term dynamics of the sector, driven by rising demand to enable the energy transition, but feel that the short-term outlook is challenging to call, driven by a lack of clarity on Chinese economic performance and moderately resilient supply pointing to the risk of oversupplied markets," Berenberg said in a statement.

Overall, the broker's preference is for gold-focused miners after a de-rating in the sector, along with conflict in the Middle East adding to gold's safe-haven attractiveness. However, it is neutral to negative on base and bulk metals (excluding coal) due to weak demand expectations.

"We ultimately think the sector is in a holding pattern, with prices looking for direction from Chinese economic support; our way to play the names is either looking for quality value which we think will re-rate, or catalyst names which we think can re-rate," the broker said.

Its top pick remains Rio Tinto, for which it has a 'buy' rating and 6,000p target price, driven by asset quality and stable free cash flow generation. Anglo American ('hold, with target at 2,600p) "remains much higher-risk to us at this point".

For gold miners, Berenberg has highlighted Pan African Resources as a key 'buy' (25p target) and Hochschild Mining ('buy', target 130p) for its turnaround story with attractive growth potential.

Also rated 'buy' are Adriatic Metals (260p target), Wheaton Precious Metals (4,700p target) and Rainbow Rare Earths (43p target).

However, Atalaya Mining has been downgraded from 'buy' to 'hold' (380p target) due to expectations that project spend will reduce free cash flow.