The broker Macquarie has picked out two compelling S&P/ASX 200 Index (ASX: XJO) shares that could be solid buys at current levels.
There has been a lot of volatility in recent times, opening up opportunities for investors to find businesses at much lower prices.
Interestingly, both of these ASX 200 shares I'm about to refer to have exposure to mining.
Let's have a look at two of the picks Macquarie just called a buy.
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Deterra Royalties Ltd (ASX: DRR)
This business is a royalty revenue owner. It receives royalties, with a key asset being Mining Area C (MAC), an iron ore hub operated by BHP Group Ltd (ASX: BHP).
Deterra also pays out 100% of its net profit after tax (NPAT) as a dividend.
Looking ahead, Deterra expects BHP's South Flank to grow its MAC volumes. Deterra says it will also be "patient and disciplined" with value-adding acquisitions.
The company has no direct exposure to project operating costs and there are no capital cost obligations.
Macquarie rates Deterra Royalties as a buy, with BHP's recent update showing growth at South Flank.
The broker has a share price target of $5 on Deterra Royalties. This implies a possible rise of about 20%.
This ASX 200 share could offer a grossed-up dividend yield as high as 13.7%.
Lynas Rare Earths Ltd (ASX: LYC)
As the name suggests, Lynas is a rare earths miner. It mines minerals such as neodymium and praseodymium (NdPr).
The company is benefitting from elevated commodity prices. In a recent update, Lynas said that the NdPr price was 70% to 80% higher than at the same time last year.
Resource prices are key for miners. It costs a similar amount to extract materials out of the ground, no matter what the commodity price is doing. So any increase in the price can largely fall to the bottom line.
The average China domestic price for NdPr during the three months to 30 June was US$120 per kilo.
In that quarter, the company generated $294.5 million of sales revenue.
The company has been making progress on the construction of the Kalgoorlie rare earths processing facility. All five kiln sections have been lifted into position and assembled.
Lynas has also been awarded a US$120 follow-on contract by the United States Department of Defence to construct a heavy rare earths facility in the US.
Macquarie recently rated the Lynas share price as a buy with a price target of $12.50. This implies a possible rise of about 50%.
The broker says Lynas is valued at 10 times FY23 estimated earnings.
