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Top 3 Mineral Producing Stocks in 2020

The mining industry is one of the most pivotal ones in the world at this moment. With products like Oil, Gold, Iron, Copper, and Lithium the sector is holding a major place in the development of world economies as well as overall cash flow all across the globe.

 

One of the biggest problems, when it comes to investing in mining companies, is the price volatility of commodity assets. Metals and other soft materials have always been on demand during the whole history of humankind. They have helped build cities, castles, weapons, armor, farming tools, vehicles, airplanes, etc. Everything that we have around is due to our advancement in the technology of mining and resource gathering. In modern times some of the most popular commodities are seeing less demand though. This is due to the depletable nature of these resources. Natural oil is said to be on the verge of running out all across the world with some experts giving it 50 to 100 years until we run dry. Others like gold have moved into different technology spheres where it is used as an addition rather than as a money currency. With the death of Gold Standard at the hands of President Nixon of the United States of America and subsequent world currencies dropping their attachment to it, the prices have fluctuated a lot. This has had a big impact on the profits that mining companies make.

 

Bad Investments

Due to these risks, a lot of investors have moved from commodity markets into other sectors like the foreign exchange market (forex, FX), cryptocurrencies, stocks, etc. Although the trading strategies do not transfer well which has led to some of the biggest mistakes forex traders make with some of them losing a considerable amount of sums due to their overconfidence with their ability to invest in miner companies. For example, a lot of people decided that investing in Coal mining companies was a good idea. Even though it has been historically one of the vital energy sources the support for it is dying. Due to climate change concerns the scientific sector has been working tirelessly on taking out as much coal out of use as possible. In 2018, the world’s electricity generation was 38% relying on coal. However, the consumption is going to plateau at around 2023. Coal is a good example of a bad investment at this point and time and there are numerous others as well.

 

This does not mean that the commodity market is dying. If anything although the world seems to be slowly giving up on natural oil and moving towards renewable energy these create other applications for such materials. Gold, for example, is being heavily used as an addition to the development of cables that are all over the place. It is a valuable addition helping electric currents move in a more efficient manner.

 

Instead of such “dodgy” materials, one should be on the lookout to invest in something that will be in demand in future even if it is not at this point and time. These are usually key industrial metals like iron ore, aluminum, and copper, which are all pivotal to the development of today’s society. Aluminum, for example, is being used in everything starting from construction to cars, bicycles, kitchen appliances, computers, etc.

 

Other good investment opportunities could come from precious metals like gold, which is always in high demand as it is a highly versatile commodity, and even though not as popular as it used to it has huge appliances in today’s society.

 

Although renewable energy is killing the oil and coal industry it gave rise to other metals that are in high demand in the modern technology sphere. This can be anything starting from Lithium, which is being used to make batteries, cobalt, and nickel. All of them are essential to the renewable energy market.

 

Who to Look Out For?

Mining these materials take a huge toll on the company though. This endeavor usually requires a lot of heavy financial investments into machinery that is required to do everything from mining to refining these materials. Other than that there is a human resource cost as the companies need professionals to be working with these machines to give the final product. This means that every investor should be looking out for three main aspects of their company of interest: the strong financial profile, low operating costs, and the right commodity. There are many companies that provide these but not all too often they fulfill all three of these categories at the same time.

 

Let’s take a look at 3 of the most reliable companies on the market at this moment.

 

Albemarle

Albemarle is a mining giant company producing Lithium. As we have already mentioned this material can have numerous applications. It is heavily used in the production of batteries that are required to store energy for anything starting from consumer electronics, electric vehicles, and renewable energy technology like wind turbines or solar panels. Due to this, there is a huge demand in the world for this metal and due to the achievements of companies like SpaceX, Tesla, and other major contributors to the development of products that need batteries, it is growing day by day. For example, Lithium consumption has almost doubled during the last 5 years. In 2015 there was a demand of 175 kilotons of this material and in 2018 annually the number reached 270. It is on its merry way to go well beyond 1000 kilotons by 20205 according to the estimates provided by Albemarle.

 

Albemarle is not only a major producer of lithium but it is also the lowest cost one. This is shown in the statistics of the company’s EBITDA margin which was well within a healthy range of 42% in 2019 although there was a slight market oversupply. Albemarle provides an incredibly strong investment balance sheet. Apart from this it happily gives out dividends which have been increasing for 26 consecutive years. Even in the face of coronavirus pandemic that locked down the whole world the company is actually lasting quite well as the demand for lithium has not dropped if anything it still increased.

 

Barrick Gold

We, humans, love gold. It is shiny, it is beautiful, it is expensive. We have been using gold as money and a show of wealth since we started mining it. It is a precious metal that still holds onto its usage. Gold is widely considered a safe-haven commodity due to the fact that it has an impeccable ability to store wealth.

 

Barrick Gold sets itself apart from other companies with its bold vision. The company is actively working on the quality of their mines rather than the quantity. What this means is that they are striving to own as many tier-one gold assets as possible. Tier one gold asset means three things: Location has to have the ability to produce 500,000 ounces of gold each year, it has to have low total cash cost, and have at least 10 years worth of supply left.

 

In 2018 the company merged with Randgold which netted the company 5 tier one gold assets. In 2019, it bought another one in conjunction with their partner mining giant Newmont Goldcorp. The best part about the whole of this business is that Barrick Gold doesn’t only produce precious minerals but is also one of the biggest copper mining companies by its market value.

 

BHP Group

The other two companies are all about solid materials. How about we delve into the energy sector next? BHP Group is the company to invest in if you want all-around mining stock. It produces three different commodities: coal, oil, and natural gas. Although we have mentioned that these energy materials are declining slowly it doesn’t mean that it’s not profitable to invest in a company that mines them. Keep in mind that most of the energy sector to this day is dependent on these materials. Natural gas is used to warm up houses, or even operate cars while petroleum is required to drive most of the vehicles across the globe. Coal is still a huge contributor to the energy sector and less developed countries are still buying it up like nothing else. These three make BHP Group a pivotal company in the development of different economies all across the world.

 

However, this is not it. If the company was working only on these three materials I would be reluctant to mention it in this list. BHP Group is also a proud producer of uranium, copper, and nickel which are all benefiting from the market’s move towards cleaner and renewable energy. In addition to this, the company is also actively producing iron ore and zinc with the newest addition to be potash, which is a food nutrient. The diversity of the commodities that BHP Group offers basically foolproof its presence on the market for decades to come. Apart from this it is one of the most low-cost producers all across the industry. Copper business, for example, was fifth-lowest cash costs in the entire industry in 2019.

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