Last year, the slowdown in China and the subsequent crash in commodity prices had left miners in a lurch. Miners saw millions being wiped out and, in the wake of falling demand, the only key to stay afloat was to control costs. Saddled with debt, they had to sell off underperforming assets.
This year, the mining industry seems to be on a better footing, having staged a comeback. A weakening greenback, slowdown in China, volatile equity markets and introduction of negative interest rates by several of the world’s central banks (including Japan) have spurred safe-haven demand for precious metals like gold and silver. The uncertainty, both before and after Brexit, has fuelled the prices. Overall, the bullion has gained 23% in the first half of the year while silver has clocked an enviable 34% gain over the same time frame. Both are currently trading at 2-year highs.
Iron ore prices have also been on an upward trajectory, touching $70 a ton in April, its highest since Jan 2015. The surge was triggered by the “big three” producers - BHP Billiton (LON:BLT) Ltd. (NYSE:BHP) , Rio Tinto (LON:RIO) plc (NYSE:RIO) , and Vale S.A. (NYSE:VALE) trimming their full-year iron production guidance. In addition, fresh stimulus measures introduced by the Chinese government to boost steel production, which implies a revival in the country’s property construction sector, led to the upswing.
Through the first half of this year, copper prices have also gained 5%. Copper prices gained in March and again in May on the back of huge jump in imports in China, the top consumer. Lately, Brexit fears also helped support prices.
What Does the Crystal Ball Forecast?
Gold prices will be supported by seasonal retail demand in the latter part of the year, from India and China. Moreover, pent-up demand due to the shutdown of jewelry stores in India in the first quarter will likely be a catalyst this year. Silver will also gain from increased demand in industrial applications as well as in jewelry. With rising safe-haven demand and dwindling supplies, gold and silver prices are set for further gains.
Demand for copper will remain strong, supported by its widespread use in transportation, manufacturing and construction, limited supplies from existing mines, and the absence of new significant development projects.
In the U.S., an improving job market and a strong housing sector will lead to 3.2% growth in steel demand this year. Thus, iron ore prices will ride on the back of increased demand. While much hope is pinned on India as the next growth engine, a recovery in the Chinese economy will help revive the overall industry.
A recent report revealed that the U.S. economy expanded a meager 1.1%, one of the weakest performances in the past several years. Further, the imbroglio over Brexit will likely keep the Federal Reserve off the interest-rate trigger for now. This in turn is a boon for precious metals.
Thus, a collusion of factors has prepared the ground for mining stocks to win back the favor of investors after disappointing last year. It would be a prudent move to zero in on some stocks that have fared well this year and exhibit all signs of healthy prospects.
5 Mining Stocks on a Rally
We have selected five stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy). These stocks have rallied considerably in 2016 so far. Further, these stocks have undergone positive estimate revisions, reflecting strong growth prospects. With their safe-haven appeal, it would be prudent to add these stocks to your portfolio now.
Avino Silver & Gold Mines Ltd. (NYSE:ASM)
Vancouver, Canada-based Avino Silver & Gold Mines Ltd. engages in the production and sale of silver, gold, and copper bulk concentrates; and the exploration, evaluation, and acquisition of mineral properties. The company owns 42 mineral claims and leases 4 mineral claims in the state of Durango, Mexico.
AVINO SILVER&GD Price
AVINO SILVER&GD Price | AVINO SILVER&GD Quote
This Zacks Rank #2 stock has surged 193.3% year to date. Moreover, over the past 30 days, its estimates have moved north 13% for the current fiscal and 18% for the next. The company has an expected impressive earnings growth of 833% for the current year and 175% for the next.
Compania de Minas Buenaventura S.A.A. (NYSE:BVN)
Headquartered in Lima, Peru, Compañía de Minas Buenaventura engages in the exploration, mining, and processing of gold, silver, lead, zinc, and copper metals in Peru.
BUENAVENTUR-ADR Price
BUENAVENTUR-ADR Price | BUENAVENTUR-ADR Quote
This Zacks Rank #2 stock has surged 189.25% year to date. Its earnings estimate for the current year has catapulted 96% over the last 30 days and, for the next year, estimates have moved up 27%. The company’s earnings are expected to shoot up 142.5% for the current year and 8.82% for the next.
Coeur Mining, Inc. (NYSE:CDE)
Based in Chicago, IL, Coeur Mining, Inc. owns, operates, explores and develops silver and gold properties.
COEUR MINING Price
COEUR MINING Price | COEUR MINING Quote
Coeur Mining carries a Zacks Rank #2 and the stock has skyrocketed 354% year to date. The bottom-line estimate for the current year has recovered dramatically over the last 60 days from a loss of 16 cents to earnings of 4 cents. For fiscal 2017, estimates have increased an impressive 107% over the said time period. The company has an expected earnings growth of 105% for the current year and 663% for the next.
MAG Silver Corp. (TO:MAG)
Vancouver, Canada-based MAG Silver, an exploration and development company, focuses on acquiring, exploring, and developing district scale projects located primarily in the Mexican Silver Belt. It explores copper, gold, silver, lead and zinc deposits.
MAG SILVER CORP Price
MAG SILVER CORP Price | MAG SILVER CORP Quote
MAG Silver carries a Zacks Rank #2 and has gained 65.22% year to date. Over the past 60 days, the Zacks Consensus Estimate has narrowed from a loss of 12 cents to a loss of 5 cents for the current year. Though in the negative territory, it is a marked improvement from the loss of 24 cents in 2015. For the next year, the loss estimate has narrowed from 10 cents per share to 2 cents per share.
Cliffs Natural Resources Inc. CLF
Headquartered in Cleveland, OH, Cliffs Natural Resources, a mining and natural resources company, produces and supplies iron ore.
CLIFFS NATURAL Price
CLIFFS NATURAL Price | CLIFFS NATURAL Quote
Cliffs Natural Resources carries a Zacks Rank #1 and the stock has skyrocketed 263% year to date. For the current fiscal, estimates have moved north 21% over the last 60 days. The bottom-line estimate for the next fiscal has recovered dramatically over the same period from a loss of 13 cents to earnings of 1 cent. The company has an expected earnings growth of 179.32% for the current year.
To Conclude
A strong price increase implies robust demand for the stock, which is often explained by either a good earnings performance or some positive news, which may further boost the stock price. Strong upward estimate revision may carry the momentum forward a little longer, making it the ideal time for investors to get on board. A combination of these two factors makes the above stocks a must-buy now.
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VALE SA (VALE): Free Stock Analysis Report
BHP BILLITN LTD (BHP): Free Stock Analysis Report
BUENAVENTUR-ADR (BVN): Free Stock Analysis Report
COEUR MINING (CDE): Free Stock Analysis Report
RIO TINTO-ADR (RIO): Free Stock Analysis Report
AVINO SILVER&GD (ASM): Free Stock Analysis Report
MAG SILVER CORP (MAG): Free Stock Analysis Report
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