What are the best mining stocks to buy?
When you think of mining companies, you might think about precious metals miners. Sure, gold and silver miners are a major part of the mining industry, but there are many more products of value that mining companies target. The lithium in your lithium-ion battery and salt on your favorite meal were products of mining activities.
The mining industry is massive. According to IBIS World, miners in the United States contribute more than half a trillion dollars to the economy annually. It comes as no surprise that mining stocks represent some of the most prized darlings on Wall Street.
On the other hand, there are 79 precious metals mining companies on the New York Stock Exchange (NYSE) alone, let alone other types of miners and other stock exchanges. So, which are the best mining stocks on the stock market today?
Best Mining Stocks to Buy
The mining industry, like many others, faced significant headwinds as the COVID-19 pandemic led to lockdowns and a labor shortage, both of which hit the mining sector hard.
The best stocks in the sector were able to withstand the blow, but even they saw declines in the market, even as silver and gold prices — along with prices of other mined commodities — rose.
This set the stage for what many believe to be an opportunity. The pandemic-fueled headwinds won’t last forever, and as the global economy continues to recover, so too will companies in the mining sector.
But what are the top stocks to jump into in this industry? Below you’ll find seven mining companies that have the potential to become big winners in the market.
1. Freeport-McMoran Inc (NYSE: FCX)
One of the World’s Largest Gold, Copper, and Molybdenum Miners With Significant Recent Growth
Founded in 1988, Freeport-McMoran has grown to become one of the largest miners in the world, boasting a market cap of nearly $47 billion. The company’s core focus is on the production of gold, copper, and molybdenum.
The company’s diverse focus offers several exciting reasons to get involved in the stock:
- Gold. Gold has long been used as a hedge against inflation and a popular safe-haven investment. It is commonly used in jewelry, technology, dental equipment, and aerospace applications.
- Copper. Copper is an excellent conductor of electricity. As consumers, businesses, and governments around the world work to reduce carbon emissions, copper has experienced higher levels of demand. That growth is expected to continue, which makes Freeport-McMoran’s copper mining activities exciting.
- Molybdenum. Finally, without molybdenum, the construction industry would come to a screeching halt. The metal is used to create hard-metal alloys that are commonly found in drills, saw blades, heating elements, and key engine components.
As with the rest of the mining sector, FCX experienced significant losses at the onset of the coronavirus pandemic. However, unlike most of its peers, the company has made an impressive comeback and is now trading on gains of more than 135% compared to pre-COVID highs.
The stock also appeals to income investors who want exposure to the mining sector. Over the past five years, the dividend yield on the stock has averaged 0.88%, and payments have been relatively consistent with only one hiccup; the company suspended dividends for a few quarters during the COVID crisis.
Freeport-McMoran’s Most Recent Financial Results
Freeport-McMoran’s second quarter financial performance slightly missed analyst expectations for revenue, but earnings beat projections. During the quarter, revenue was up 88.21% compared to the same quarter last year, coming in at $5.75 billion. Earnings per share (EPS) clocked in at $0.73, representing growth of more than 2,333% year over year. Net income grew a whopping 1,943.4% to $1.08 billion.
The company also experienced significant growth in nearly every other fundamental metric worth considering. Net profit margin, operating income, and cash on hand all grew by triple-digit percentages. Cost of revenue improved by more than 42%.
2. Barrick Gold Corp (NYSE: GOLD)
A Global Gold Producer Showing Strong Growth
Barrick Gold is one of the largest gold miners in the world with a more than $32 billion market capitalization. Although the company is headquartered in Canada, it has mining operations in 12 countries all over the world, including in Argentina, Canada, Chile, and the Dominican Republic.
Like most gold mining stocks, COVID-19 weighed heavily on Barrick Gold. Unfortunately for the company, as the stock market recovered and gold prices fell in the past year, Barrick Gold’s stock has given up more than 35% of its value.
Nonetheless, many believe this to be an opportunity. After all, the company has beaten earnings projections for the past four consecutive quarters, showing strong growth in both net income and earnings in the second quarter. The stock’s declines have led to a significant undervaluation compared to other gold stocks.
At the same time, there’s an argument that the recent bull run in the market may be coming to an end. The U.S. Federal Reserve has suggested it will begin tapering back economic stimulus relatively soon. This action may result in a market dip.
Simultaneously, the recent bull market has led to substantial overvaluations marketwide, further pointing to a potential correction, or even a crash.
If the market heads for sustained downward movement, the price of gold is likely to climb as investors look for safe havens. Of course, if the price of gold heads up, there’s a strong chance Barrick Gold’s stock will follow.
Barrick Gold’s Most Recent Financial Results
The company has beaten analyst earnings expectations for the last four consecutive quarters. Unfortunately, the company slightly missed revenue expectations in the second quarter, experiencing a 5.3% year-over-year decline to $2.89 billion.
Just about every other metric proved to be positive. Net income came in at $411 million, up more than 15%, and earnings per share came in at $0.23, also up about 15%. Net profit margin, operating income, and net cash on hand also showed significant growth.
3. Franco Nevada Corp (NYSE: FNV)
A Premier Gold Royalty and Streaming Company
While Franco Nevada doesn’t manage mining operations of its own, it’s an important player in the mining sector. Founded in 2007, the company has quickly grown to become one of the world’s premier gold royalty and streaming companies.
It costs quite a bit of money to develop and operate a gold mine, and many companies simply don’t have the cash position to foot the bill.
That’s where Franco Nevada comes in. The company provides the upfront cash needed to cover these costs, but it doesn’t do so for free.
In exchange for the upfront funding, the company requires one of two things:
- A Royalty Agreement. Royalty agreements give the company rights to a share of the revenue generated from the sale of gold produced in the mine. When the mine does become productive, the gold miner handles the work involved in producing and selling the precious metal, and FNV collects a percentage of the money made.
- A Streaming Agreement. Streaming agreements work quite a bit like royalty agreements with one key difference. These agreements give the company funding the project the right to purchase a percentage or all of the gold produced in the mine at a discounted rate. The company can then sell the gold it bought at a discount on the open market for a profit.
The business model is one that has worked out well for Franco Nevada. In less than a decade and a half, the company has grown to boast a nearly $26 billion market capitalization and has one of the strongest balance sheets in the industry.
Franco Nevada Corp’s Most Recent Financial Results
Franco Nevada has a long history of producing exceptional growth. In the past three quarters, the company beat analyst projections in terms of both revenue and earnings per share.
When it comes to revenue, the company produced $346.6 million in the second quarter, up more than 78% year over year. Net income clocked in at $175.3 million, up more than 85%. Earnings per share came in at $0.92, up about 84%. The company also saw strong improvements in net profit margin, operating income, and cost of revenue.
4. Newmont Corporation (NYSE: NEM)
The Largest Gold Mining Company in the World
Newmont Corporation is the largest gold mining company in the world, with gold mines that produced a whopping 5.8 million ounces of the yellow metal in 2020.
That alone is impressive, but the company doesn’t plan to stop there. It’s constantly investing in exploration and development projects in an attempt to expand its production further.
Newmont Corporation is headquartered in Denver, Colorado, and has a wide range of operations in the U.S. and the rest of North America. It also has a global footprint that extends to South America, Africa, and Australia.
While Newmont is the world’s largest gold producer, it’s also smart enough to hedge its bets with other products. The company is also a key producer of silver, copper, zinc, and lead, all of which are high-demand products.
Like other miners, Newmont experienced declines as a result of COVID-19, but unlike most, it has made more than a full recovery since. However, the stock has been trending down more recently, leading many to believe that it has fallen back into undervalued territory, perhaps setting the stage for yet another opportunity to exploit a strong recovery for profits.
Newmont Corporation’s Most Recent Financial Results
Newmont has a long history of producing stellar financial results, and the second quarter was no different. While the company missed revenue expectations by a thin margin, the year-over-year growth was hard to ignore. During the quarter, the company generated $3.06 billion in revenue, up nearly 30% from the same quarter last year.
Newmont smashed analyst projections with regard to earnings per share. Earnings came in at $0.81 per share, representing growth of more than 88%. Net income was reported at $650 million, also up more than 88% year over year.
All other metrics proved to be positive as well, with net profit margins, operating income, net change in cash, cash on hand, and cost of revenue all showing significant improvements.
5. Rio Tinto Limited (OTC: RTNTF)
Produces Key Basic Materials, Including Lithium and Iron Ore
Rio Tinto is quite different from other companies mentioned on this list. The stock trades on the over-the-counter (OTC) market, which most investors should generally stay away from for the most part.
However, unlike most other stocks listed on the OTC market, Rio Tinto is not a penny stock in the beginning stages of business. It’s the second largest mining company in the world, boasting a market capitalization of nearly $115 billion.
So, why is it listed on the OTC?
The company was founded in London, where it is headquartered. It is listed on the London Stock Exchange and receives plenty of investor interest there. As a result, it’s simply not worth the hassle of jumping through hoops to become listed on a major U.S. stock exchange, but that doesn’t make it a poor investment.
Another difference between Rio Tinto and most others on this list is that, although it does mine gold and copper, its core focus isn’t on the precious metals you normally think of when you imagine mining companies. Rio Tinto mines a wide variety of products ranging from iron ore to aluminum, copper, uranium, and even diamonds.
This focus offers significant growth potential, specifically as it relates to its lithium and iron ore production. Here’s why:
- Iron Ore. Iron ore is one of the most important basic materials to developed economies. It’s used in nearly every construction project and found in various products. Interestingly, a global housing shortage is starting to emerge, leading to a boom in homebuilding. As that boom takes place, the world’s producers of materials commonly used in construction could enjoy substantial growth.
- Lithium. Lithium is an important component of the batteries consumers use every day. Moreover, with Teslas and other electric vehicles becoming highly popular and the renewable energy sector booming, demand for lithium has climbed so high that there’s a global shortage of the product. As a result, lithium prices are likely to skyrocket ahead.
Rio Tinto’s Most Recent Financial Results
As you would likely expect from one of the world’s largest companies, Rio Tinto is known for producing compelling financial results, and the second quarter was no different.
During the quarter, the company produced $16.54 billion in revenue, up 70.87% on a year-over-year basis. Net income was even more impressive, clicking in at $6.16 billion for a year-over-year growth rate of 271.32%. Of course, with net income seeing such incredible growth, earnings were impressive, coming in at $3.78 per share for a growth rate of 270.59%.
The company also produced compelling results on all other fundamental metrics. Net profit margin, operating income, net change in cash, and cost of revenue all experienced either double- or triple-digit percentage growth.
6. Wheaton Precious Metals Corp (NYSE: WPM)
Among the Largest Silver Companies in the World; Engaged in Mining and Funding Other Mines
Founded in 2004, it took under two decades for Wheaton Precious Metals to become one of the world’s largest silver streaming companies. Today, the company boasts a nearly $18 million market capitalization and a balance sheet with plenty of free cash flow to fund other projects.
As with most companies on this list, Wheaton produces metals from its own mines, but the amount of silver it extracts itself is vastly overshadowed by the silver produced through its streaming agreements.
Like Franco Nevada, Wheaton provides the upfront cash mines need for development and operation in exchange for a discount when purchasing the silver the mines it funds produces.
The model has worked out well for Wheaton, producing compelling revenue and profits nearly every time it issues a financial statement.
At the moment, the company has 27 active streams, meaning it has helped to fund the development and operation of 27 producing mines. In addition, it’s constantly looking for new opportunities to fund other developments that are likely to turn into profitable projects.
Wheaton Precious Metals’ Most Recent Financial Results
In the second quarter, the company beat analyst expectations in terms of revenue, but slightly missed on earnings per share. However, there’s a strong argument that this is another company for which analysts set the bar far too high. Just look at the growth experienced in the quarter and form your own opinion:
During the quarter, the company produced $330.39 million in revenue, up more than 33% on a year-over-year basis. Net income came in at $166.12 million, with earnings coming in at $0.37 per share, up 57% and 60.87%, respectively.
The company also experienced double- to triple-digit percentage improvements in net profit margin, operating income, cash on hand, and cost of revenue.
7. Kirkland Lake Gold LTD (NYSE: KL)
Huge Gold Mining Company With Strong Results Over the Past Year
Founded in 1988, Canadian company Kirkland Lake Gold is a senior gold producer that produced a whopping 1.37 million ounces of gold in 2020, with plans to produce between 1.3 and 1.4 million ounces this year.
While Kirkland Lake’s home base is in Ontario, its business spreads far beyond Canada’s borders. Much of its operations take place in Australia.
The company’s business is largely anchored by its three top producing mines, the Macassa Mine and Detour Lake Mine in Ontario, and the Fosterville Mine in the State of Victoria, Australia. All three produce free cash flow and have substantial in-mine growth potential.
At the same time, each of the three mines is surrounded by attractive regional exploration opportunities, which the company intends to take advantage of in order to drive continued growth.
Moreover, Kirkland Lake takes a low-cost approach to the production of gold, focusing on mines that produce large quantities of the metal with minimal effort. This has led to a strong return of capital for investors and the opportunity to use profits to pursue other growth opportunities.
Kirkland Lake Gold’s Most Recent Financial Results
Kirkland Lake is known for producing compelling financial results, and the second quarter was no different. During the quarter, the company beat earnings and revenue expectations by 6.15% and 1.01%, respectively.
Revenue came in at $66.74 million, representing year-over-year growth of 14.07%, while earnings came in at $0.91 per share, representing year-over-year growth of 68.52%. Net income was also a key point of interest, growing 62.53% year over year to $244.17 million.
The company also did overwhelmingly well on all other fundamental metrics, with the most impressive being a net change in cash of more than 900%. Net profit margins were up more than 42%, and cost of revenue improved by nearly 20%.
Consider Mining ETFs
If you want to get involved in the mining sector but either don’t have the know-how or desire to do the research it takes to find and maintain a well diversified portfolio of individual stocks, there’s another way to get involved.
You may want to look into exchange-traded funds (ETFs).
These funds pool investment dollars from a large group of investors, then use the money they’ve collected to make large investments in a wide range of individual stocks based on the prospectus for the fund.
ETFs have enjoyed quite a bit of popularity among the investing community because they offer a low-cost, simple way to expose your portfolio to the types of stocks you want without having to do extensive research on each stock you invest in.
Today, there are ETFs designed around just about any industry and investment thesis you can think of, and mining is no different. A quick search on your favorite search engine will yield several mining-centric funds that have the potential to produce compelling returns.
If you’d like to take a low-cost, simplified approach to mining stock allocation, these funds are the way to go.
The mining industry is a massive and growing one, and that growth is likely to continue. Without miners, the materials we need to construct high rises, keep electric vehicles on the road, or even make jewelry would be nearly impossible to find on the open market.
However, as with any other industry, it’s important to do your research when investing in the mining sector. After all, no two companies are created equal, nor will they present the same opportunities for investors.
Disclaimer: The author currently has no positions in any stock mentioned herein nor any intention to hold any positions within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.