Mining companies can find many different things in the ground. Precious metals like gold and silver are often mined, but there are also other valuable things that mining companies get. For example, the lithium in your battery and salt on your food were products of mining.
The mining industry is a massive part of the United States economy. IBIS World says miners contribute more than $500 billion annually to the economy. It’s no wonder mining stocks are some of the most popular on Wall Street.
There are many different types of mining companies on the stock market. Today, we’re going to look at the best mining stocks. We’ll be looking at companies listed on the New York Stock Exchange.
Best Mining Stocks to Buy
Like many other industries, the mining industry faced significant problems because of the COVID-19 pandemic. It included lockdowns and a labor shortage.
Some stocks in the sector stayed strong during the market crash, but most saw their values go down. It happened even though the prices of silver and gold increased, as well as other mined commodities.
It created the conditions for what many see as a chance. The pandemic-related challenges won’t endure forever, and mining businesses will also benefit from strengthening the world economy.
But which stocks in this sector are the best ones to buy? Seven mining businesses that have the potential to dominate the market are listed below.
1. Freeport-McMoran Inc (NYSE: FCX)
Founded in 1988, Freeport-McMoran is a large mining company. It produces gold, copper, and molybdenum. The company has a market cap of nearly $47 billion.
The company’s various emphasis provides some intriguing reasons to invest in the stock:
For a long time, people have used gold as inflation protection and financial security. People often use gold in jewelry, technology, dental equipment, and aerospace applications.
Copper is a good conductor of electricity. It means it can help carry electricity through wires. When people want to reduce the number of carbon emissions, they need copper. The demand for copper is expected to keep growing, which makes Freeport-McMoran’s copper mining activities exciting.
Molybdenum is a metal that is commonly used in the construction industry. It is found in hard-metal alloys used in drills, saw blades, heating elements, and critical engine components.
FCX, like other mining companies, lost money at the start of the coronavirus pandemic. FCX recovered faster than its rivals and is presently trading at 135% of its pre-COVID high.
The stock also appeals to investors who want to make money from the mining sector. The stock has paid out money to investors yearly for the past five years. The only problem was a few quarters where the company stopped paying dividends because of the COVID crisis.
Freeport-McMoran’s second quarter financial performance was close to analyst expectations for revenue, but earnings were better than expected. During the quarter, revenue increased by 88.21% compared to the same quarter last year and came in at $5.75 billion. Earnings per share were $0.73, more than 2,333% higher than during the same quarter last year. Net income grew 1,943% to $1.08 billion.
The company also grew significantly in nearly every other important metric. Operating revenue, cash on hand, and net profit margin increased by triple digits. The cost of revenue increased by more than 42%.
2. Barrick Gold Corp (NYSE: GOLD)
Barrick Gold is one of the biggest gold producers in the world. It has a market capitalization of more than $32 billion. The company is headquartered in Canada, but it has mining operations in 12 countries worldwide. These countries include Argentina, Canada, Chile, and the Dominican Republic.
Like many other gold mining stocks, Barrick Gold has suffered since COVID-19 began. Over the previous year, when the stock market recovered and gold prices fell, the value of the company’s stock decreased by more than 35%.
However, some people believe that this is an excellent opportunity. The company has outperformed earnings forecasts for the past four straight quarters. The second quarter saw significant net income and earnings growth. The stock has been significantly undervalued compared to other gold equities due to its falls.
There is an argument that the recent bull run in the market may be coming to an end. The U.S. Federal Reserve has hinted that it may soon wind down economic support. This decision might cause the market to decline.
At the same time, the recent bull market has caused prices to go up a lot, which could mean that there will be a correction or crash soon. If this happens, the gold cost will likely increase because investors want somewhere safe to put their money. Additionally, it is expected that Barrick Gold’s stock will increase if the price of gold increases.
The company has outperformed analyst earnings forecasts for the past four quarters. However, the company slightly missed revenue expectations in the second quarter, experiencing a 5.3% year-over-year decline to $2.89 billion.
Almost every other metric was positive. More than 15% more money was made, or $411 million, in net income. The earnings per share increased by nearly 15% to $0.23. Operating income, net cash on hand, and net profit margin increased significantly.
3. Franco Nevada Corp (NYSE: FNV)
Franco Nevada is not a mining company but an essential player in the mining sector. The company was founded in 2007 and quickly became one of the world’s leading gold royalty and streaming companies.
The construction and maintenance of a gold mine are pretty expensive. Many businesses cannot afford to do this, but Franco Nevada helps out. The company provides the money needed for these costs but doesn’t do this for free.
The business asks for one of two things in return for the upfront cash:
- A Royalty Contract
Royalty agreements allow the company to get a share of the money from selling mined gold. When the mine becomes productive, the gold miner will take care of producing and selling the gold. Then, FNV will collect a percentage of the money made.
- A Streaming Agreement
A streaming agreement is a bit like a royalty agreement, but there is one key difference. With a streaming agreement, the project’s funder can buy the mine’s gold at a discount. The company makes money by reselling discounted gold on the open market.
Franco Nevada has a strong business model. The company multiplied and has a market capitalization of nearly $26 billion. Franco Nevada also has a solid balance sheet.
There is a lengthy history of success for Franco Nevada. The company’s revenue and earnings per share exceeded analyst expectations in the previous three quarters.
The company’s revenue was $346.6 million in the second quarter, which is more than 78% higher than in the same quarter last year. The company’s net income was $175.3 million, more than 85% higher than last year. The company’s earnings per share were $0.92, more than 84% higher than last year. Additionally, the company saw improvements in its net profit margin, operating income, and cost of revenue.
4. Newmont Corporation (NYSE: NEM)
The biggest gold mining corporation in the world is Newmont Corporation. In 2020, their mines generated 5.8 million ounces of gold.
Newmont Corporation is a very successful company. It has its headquarters in Denver, Colorado, and has many operations in the U.S. and North America. The company also has a global presence, with operations in South America, Africa, and Australia.
The largest producer of gold in the world is Newmont Mining. However, it can also produce additional goods such as silver, copper, zinc, and lead. These goods are in high demand at the moment.
Newmont suffered decreases as a result of COVID-19, just like other miners. However, it has made more than a full recovery since then. The stock has been trending down recently, but some believe it is now undervalued. It could be a good opportunity to make money if the stock recovers like before.
Newmont has a long history of making money and doing well. In the second quarter, it didn’t make as much money as people expected, but it was still growing. Newmont made $3.06 billion in revenue in the quarter, about 30% more than last year’s same quarter.
Newmont’s EPS beat expectations. Earnings per share rose 88% to $0.81. Their net income rose 88% to $650 million. Their net profit margin, operating income, and cash flow all improved.
5. Rio Tinto Limited (OTC: RTNTF)
Unlike the majority of the other businesses on this list, Rio Tinto is unique. The stock is traded on the over-the-counter (OTC) market, which most investors often avoid.
Rio Tinto is not a new corporation, unlike most other companies listed on the OTC market. It is a large mining company that is worth nearly $115 billion.
The company is based in London. It attracts a lot of investor interest because it is listed on the London Stock Exchange. So it’s not worth it to list the company on a major U.S. stock exchange, but that doesn’t mean it’s not a good investment.
Rio Tinto is different than most other mining companies because it mines a lot of different things. It mines iron ore, aluminum, copper, uranium, and diamonds. It doesn’t just focus on precious metals.
This area has enormous room for growth, particularly in lithium and iron ore production. It is why:
- Iron Ore
Iron ore is an essential material that is used in many construction projects. It is found in many different products. A global housing shortage is starting, which means more homes are being built. It could lead to a growth in the number of producers of materials commonly used for construction.
Lithium is an important component of batteries that people use daily. Moreover, lithium demand has increased significantly with Teslas and other electric cars becoming more popular and the renewable energy sector growing. So much that there is now a global shortage of this product. It indicates that lithium will eventually become more expensive.
As you could expect from one of the biggest companies, Rio Tinto is known for producing good financial results. It is especially true in the second quarter, when they generated $16.54 billion in revenue, up 70.87% on a year-over-year basis. Net income was even more impressive, at $6.16 billion for a year-over-year growth rate of 271.32%. Earnings were amazing, too, coming in at $3.78 per share for a growth rate of 270.59%.
The company’s other fundamental metrics also produced good results. Net profit margin, operating income, the net change in cash, and cost of revenue all had double- or triple-digit percentage growth.
6. Wheaton Precious Metals Corp (NYSE: WPM)
Wheaton Precious Metals, founded in 2004, became one of the world’s largest silver streaming companies in less than 20 years. Today, it has a market capitalization of nearly $18 million and plenty of free cash flow to fund other projects.
Like many other companies, Wheaton produces metals from its mines. However, the amount of silver it extracts is much smaller than the silver it gets from its streaming agreements.
Wheaton gives mines money to develop and operate them in exchange for a discount on the silver the mines produce. This model has worked out well for Wheaton, growing revenue and profits nearly every time it releases a financial statement.
The company has 27 active streams. It has helped fund the development and operation of 27 profitable mines. The company is always looking for new opportunities to fund other developments that have a good chance of becoming worthwhile projects.
In the second quarter, the company had more revenue than expected. But they missed earnings per share by a little bit. Some people say that this is because analysts set the bar too high. But if you look at how much the company grew in that quarter, you can make up your mind.
The company’s revenue increased more than 33% from the year before. An increase helped it in net income and earnings per share. The company also saw improvements in net profit margin, operating income, cash on hand, and cost of revenue.
7. Kirkland Lake Gold LTD (NYSE: KL)
Kirkland Lake Gold is a Canadian company that was founded in 1988. The company produces a lot of gold, with 1.37 million ounces produced in 2020. The company plans to build 1.3 and 1.4 million gold this year.
Kirkland Lake’s home base is in Ontario, but it does business elsewhere. A lot of its work happens in Australia. The company is doing well because it has three profitable mines: the Macassa Mine and Detour Lake Mine in Ontario and the Fosterville Mine in Australia. All three mines generate cash flow and have a lot of room to grow.
The company plans to take advantage of regional exploration opportunities around its three mines to continue growing.
In addition, Kirkland Lake focuses on mines that produce large quantities of gold with minimal effort. It has led to a strong return of capital for investors and the opportunity to use profits to pursue other growth opportunities.
Kirkland Lake produced good financial results in the second quarter. They beat earnings expectations by 6.15% and revenue expectations by 1.01%.
Revenue was $66.74 million, 14.07% more than last year. Earnings were $0.91 per share, which is 68.52% more than last year. Net income was $244.17 million, which is 62.53% more than last year.
The company did very well on all other fundamental metrics. The net change in cash was more than 900%. Net profit margins were up more than 42%. Cost of revenue improved by nearly 20%.
Consider Mining ETFs
If you want to get into the mining sector but don’t want to do the research it takes to find good stocks; there’s another way. You can buy a mining company that is already doing well.
If you’re looking to invest in stocks, you may want to look into exchange-traded funds (ETFs). According to the fund’s prospectus, these funds allow investors to buy many stocks simultaneously. It can help you start investing.
ETFs have gained popularity because they offer an easy way to invest in stocks without much research. Suppose you’re unclear about which companies to invest in. In that case, ETFs are a worthwhile investment because they expose you to various stock kinds.
Some ETFs focus on different types of mining. You can find these by doing a quick search online. If you want to invest in mining without doing much research, then these ETFs are a good option.
The mining industry is a big and important one. This industry is growing, and it is likely to continue to grow. Miners are necessary to get the materials we need for everyday life. We need them to build high rises, keep electric cars on the road, and even make jewelry.
However, doing your research when investing in the mining sector is essential. It is because not all companies are the same and won’t offer the same opportunities for investors.
Frequently Asked Questions About Mining Stocks
Is Mining Stock a Good Investment?
Mining stocks can be a good investment, even though they can be very volatile. They often grow faster than the market as a whole, and they have done so for many years or decades.
Do Mining Companies Pay Dividends?
Many mining companies will pay large dividends in 2021. Some of the biggest payouts came from BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG). These companies were among the top 10 dividend-paying stocks in the world that year.