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Mining has been an integral part of the global economy for centuries. The global metal mining industry is expected to reach roughly $745 billion by 2030. Metals are essential parts of everyday life and some rare earth metals are required for high-tech industries to function properly. The demand for mined materials remains consistently high and growing over the years, which creates promising opportunities for investors in the sector. However, environmental concerns have plagued the industry for decades and modern investors are taking note of the issue and expecting mining companies to follow some environmentally-friendly and sustainable mining practices to reduce their impact on the environment.
Metals, such as gold, silver, copper, iron, palladium, lithium, etc. are essential components of some of the largest industries in the world, including construction, automaking, consumer electronics, as well as many more. Despite robust demand, the stock prices of mining companies tend to fluctuate frequently, which can be attributed to regulatory scrutiny, licensing, and exploration efforts.
If you would like to invest in mining stocks but don’t know where to start - this investfox guide is for you.
The mining industry can be considerably different from all other stock sectors, due to the fact that it carries a lot of geopolitical and environmental implications with it, which makes mining a hot topic of discussion. Investors that have little experience with the mining sector but want to add some stock from these industries to their portfolios, should consider the factors below:
Pan American Silver Corporation is a Canadian mining company that operates mines in Canada, Mexico, Peru, Argentina, and Bolivia. The company mines silver, gold, and other metals. They produce an average of 19 million ounces annually and are one of the most attractive silver mining stocks currently on the market.
The company is diversified across Latin America, which reduces the regulatory risks and the need for actively pursuing ESG practices for sustainable mining. PAAS boasts a management team with decades of experience working in the field. In terms of finances, PAAS has a strong balance sheet that allows the company to conduct its exploration efforts without the need to excessively increase its debt burden. The Q4 earnings call from 2022 highlights some key milestones of Pan American Silver:
Despite this, Pan American Silver has struggled for profitability, which could be a cause for concern for long-term investors.
"..industrial demand is very strong, you know silver is a very important metal for the future and right now if you look at electronics you look at cars etc. so but the investment demand has to be there in order to bring it back" - Michael Steinman
In terms of stock performance, PAAS had a difficult year in 2022. Increased inflation and supply chain constraints have caused the stock to tumble throughout the year, losing 40% of its market value since the start of 2022.
However, lower valuations could present affordable buying opportunities for new investors to add the stock to their portfolios.
Barrick Gold is a Canadian mining company that owns and operates gold and copper mines in several countries around the world, including Canada, Chile, Argentina, Peru, The United States, and Papua New Guinea. Barrick Gold is one of the largest gold mining companies in the world and has a long track record of stock returns, which makes it popular among conservative investors.
Similarly to Pan American Silver, Barrick Gold’s diverse portfolio of mines reduces the overall risk exposure for the company. This, coupled with a strong balance sheet and positive cash flows, makes Barrick Gold one of the healthiest mining companies on the market. The latest financial report from Q4 2022 highlights some of Barrick Gold’s financial performance, as well as operational objectives going forward:
While the latest quarterly results have been positive, Barrick Gold, similarly to most of the mining industry, has endured a tough year in 2022. Macroeconomic headwinds and supply chain constraints have scared investors away from mining stocks, which has caused Barrick Gold’s share price to shed roughly 30% of its market value since the start of 2022.
"I think the the the the real term is uh transition, and that's a global transition, and it needs uh mining to get there because you know if we just think that we're gonna go to green energy and and the world's going to be at a better place, it's not going to happen" - Mark Bristow
As of 2023, Barrick Gold is on track with its operations goals and could be one of the best opportunities for market participants to invest in a gold mining company.
Freeport-McMoRan is an international mining company that owns and operates copper mines in the United States, Peru, Chile, and Indonesia. Besides copper, the company also explores and mines gold and molybdenum. Freeport-McMoRan is one of the largest producers of all three of these metals and employs an experienced team of professionals that have a long track record of successfully working in the mining industry.
When compared to competitors, FCX stands out through its diversified mining portfolio, commitment to sustainable mining practices, and strong balance sheet to sustain its operations in the long run.
The Q4 2022 financial report posted by Freeport-McMoRan highlights some of the most important milestones reached by the company during the period:
FCX’s stock has performed relatively well when compared to other major mining stocks on the market, losing just 11% of its market value since the start of 2022. The stock had fallen sharply by the end of September 2022, but strong financial performance and increasing commodity prices have helped the stock reclaim the $40 range once again.
While the short-term prospect of Freeport-McMoRan may seem somewhat limited, considering the rebound from September 2022, it is still one of the most reliable and high-performing mining stocks on the market.
"We start with looking after our workers welfare environmental impacts are are critical and they're inherent in what we do we move very large amounts of material to be able to mine we process large amounts of material and how we mitigate the environmental impacts of what is part of those operations is very important to us" - Richard Adkerson
Agnico Eagle Mines Limited is a Canadian gold mining company that is focused on exploring and mining gold and other byproducts, such as zinc and copper from mines across Canada, Finland, and Mexico. The company operates a diverse portfolio of long-life, low-cost gold mines, which it primarily uses for underground mining purposes.
Agnico Eagle Mines has a long track record of superior performance, with recent financial statements further enforcing the company’s strong fundamentals. The Q4 results from 2022 show improvements in terms of the company’s mining output, as well as its bottom line:
The report shows the increased production costs facing Agnico Eagle Mines throughout 2023. However, the company has a strong balance sheet and stable cash flows, which allows it to invest in new mining facilities and increase output beyond 2023.
In terms of stock performance, AEM has lost around 20% in market value YoY, which has been part of a wider trend throughout the bearish year of 2022.
"[!in!] we had the safest year in a 65-year history of the company nothing's more important than the safety of our employees and you know, good safety is also an indicator of well-run mines. So very proud on the safety side but also very proud we delivered solidly into our guidance
solidly into our production guidance and towards the upper end as we had guided on cost which is quite something given we had a year with the highest inflation in the last 40 years" - Ammar Al-Joundi
Rio Tinto is an international mining company that owns and operates a diverse portfolio of mines in Australia, Canada, The United States, Chile, and Mongolia. The company mines a wide variety of materials, including gold, copper, iron ore, aluminum, uranium, and coal.
Rio Tinto is one of the largest mining corporations in the world, with the company's market capitalization figure standing at over AUD 179 billion, which is roughly $120 billion.
Rio Tinto benefits from its diverse portfolio of mines and metals, as well as an experienced management team and a complex supply chain, which allows the company to meet demand from all over the world. A strong focus on cost-efficient mining also gives Rio Tinto an edge over the competition.
Rio Tinto’s Q4 2022 earnings call highlights some of the most important milestones and plans of the company:
Rio Tinto’s bottom line was hit hard by the 2022 bear market. Rising inflation and supply chain constraints meant that the company was unable to replicate its FY 2021 results. However, the stock has performed better than anticipated during this period and is up by over 3% YoY. This is in stark contrast to the double-digit declines experienced by most large industrial companies in 2022.
Relatively high valuations might deter some investors from buying the stock at present. However, Rio Tinto’s solid fundamentals and robust balance sheet could be a welcome addition to any investor’s portfolio in 2023.
"I will say one thing to you, Rio Tinto is a very long-term company, and when you open my mine you know you have it for the next typically 30 40 years" - Jakob Stausholm
BHP Group Limited is an international resources company that is engaged in the exploration and mining of coal, copper, iron ore, zinc, and nickel. BHP primarily operates mines in Australia and the Americas and includes a number of mines, smelters, refineries, and port facilities in its portfolio. The company also owns and operates oil and gas assets around the world.
Along with these BHP has an ownership interest in several joint ventures, which allows the company to reduce its overall risk exposure.
Similarly to most other mining companies, BHP was forced to incur more costs in 2022. Supply chain costs and choppy commodity prices severely impacted the company’s bottom line. While BHP maintained profitability throughout the year, its net profit margin fell by almost 20%.
"Mining is essential and we know this. I'm not talking here just about the value we create for our direct stakeholders; the resources we produce enable continued economic development and improvement in living standards around the world. In the end there is little choice about whether mining happens or not, there is though choice about how it happens and who does it" - Mike Henry
The Q4 earnings report from December 2022 highlights the drop-off in operational performance for BHP:
While the operational results from 2022 were far from stellar, BHP’s stock managed to mark a turnaround from October 2022. The stock has currently only lost 1.25% of its market value YoY. However, as a stock market boom is unlikely to happen in 2023, new investors could probably buy the stock at a lower valuation further down the line this year.
Southern Copper Corporation is a mining company that specializes in the exploration and mining of copper, zinc, molybdenum, and silver. The company primarily operates mines in Mexico, Peru, and Chile. The company owns and operates a number of open-pit and underground mines, while actively pursuing sustainable mining practices to mitigate the environmental effects caused by its operations.
Southern Copper Corporation is one of the largest copper producers in the world, mining roughly one million metric tons of copper per year.
Southern Copper’s Q4 2022 earnings report showed some improvement in the company’s bottom line, as well as net profit margins:
Southern Copper’s financial results have been largely in line with its stock performance. The company has gained 3.5% in market value YoY, while incrementally improving its quarterly financial results as well. This is a massive surge in stock price, which has increased from $43 in October 2022, to $76 in March 2023. However, analysts are not overly optimistic about market performance in 2023, which could mean that listed equities could drop lower, presenting opportunities for new investors to enter the market and buy SCCO stock at cheaper prices.
Glencore PLC is a multinational commodities trading and mining company with operations in over 50 countries around the world. Glencore is engaged in the production and trading of cobalt, zinc, copper, nickel, and coal, as well as oil and gas. Glencore is double-listed on the London and Johannesburg stock exchanges. The company operates a wide network of physical commodities and trades anything from metals and minerals to energy and agricultural products on a global scale.
Glencore closed out the 2022 fiscal year with stellar financial results in the fourth quarter:
Compared to Glencore’s financials the stock price has increased a modest 3.5% YoY. However, a bulk of this bullish momentum has largely subsided and Glencore’s stock could drop further if a global recession officially hits the markets in 2023. With mixed expectations from analysts, new investors could wait for Glencore’s stock price to dip below the 450 GBX mark before buying and holding the stock for the long term.
"I want to be able to capitalize on those great ideas that come from our people so we can continue to grow this business to greater success for the next 40 or 50 years" - Gary Nagle
Overall, Glencore is one of the largest mining and commodities trading corporations in the world, and with a solid balance sheet and stable profitability, the company could be a welcome addition to the portfolios of conservative investors.
Mining stocks have opened the year quite positively. Many mining stocks, such as Rio Tinto and Southern Copper Corporation, have increased their market capitalization YoY. However, many analysts are skeptical of the long-term implications of this growth.
In general, mining stocks can be solid additions to any stock portfolio. Most mining companies are mature businesses with robust supply chains that have a proven track record of delivering results.
Yes. Many mining stocks represent mature, profitable corporations that pay dividends to shareholders. However, the dividend yield and payout can vary greatly depending on the performance of individual companies.