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10 Best Mining Stocks to Buy in August 2022

Daniel Rogers

Aug 02, 2022 17:30

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The world economy depends on a variety of metals and commodities. In order to construct and produce goods, products, and infrastructure, industries require raw materials. Mined resources are in great demand during economic growth, which raises costs.

 

However, there are cycles in the mining business. When the economy is weakening, the demand for mined resources often declines. In a recession, mining stock values often fall. Given the predictions that soaring inflation would compel central banks to hike interest rates, which might send the global economy into a recession, that is a worry for investors in 2022.

 

Russia's invasion of Ukraine is one element contributing to inflation. Both nations are important fertilizer producers and play a vital role in the iron and steel sectors. The battle might keep pushing those commodities prices higher if it goes on.

 

Investors should concentrate their attention on mining firms that can withstand upcoming economic storms, given the cyclical nature of the mining business. Let us examine some of the top mining stocks for 2022 and learn more about the mining sector.

Top 10 Mining Stocks Every Trader Should Know

1. BHP Group

A diverse resources corporation is BHP Group. Copper, coal, nickel, iron ore, zinc, and potash are all extracted from and processed by its fully integrated mining operations. The company has global mining assets. BHP Group also had an oil and natural gas division, but in a deal finalized in 2022, it combined those assets with Woodside Petroleum (NYSE: WDS). BHP became a pure-play mining business as a result of the transaction.

 

Although BHP Group manufactures a variety of goods, its main objective is to be a cost-effective manufacturer. It effectively manages big mines full of resources and employs technology like autonomous trucks to cut expenses. The mining company's emphasis on cutting costs also lessens the effect of inflation.

 

BHP Group combines its low-cost operations with a robust balance sheet, which it maintains by frequently offloading its non-core assets and least profitable mines.

 

The mining industry is still well-positioned to pursue high-return expansion initiatives, despite weak commodity prices. Its production output is comparatively steady. Even if its cash flow is somewhat unpredictable, BHP's low expenses allow it to produce free cash flow that it can dependably use to buy stock and pay dividends.

 

BHP Group's dividend fluctuates somewhat, similar to Barrick. The corporation pays at least half its profits as dividends each reporting period; therefore, its dividend expenditure will fluctuate with cash flow.

2. Rio Tinto

A diverse mining corporation is Rio Tinto. Iron ore, aluminum, and copper are the three industrial metals that are most often consumed. Boron, salt, diamonds, titanium, and other minerals are among the numerous metals and minerals that Rio Tinto mines.

 

Like its competitor BHP Group, Rio Tinto hopes to become a profitable producer of metals and minerals at cheap costs. Running integrated, substantial mining assets can keep costs low. Rio Tinto invests in cutting-edge technologies that boost productivity and cut costs, such as autonomous cars and renewable energy.

 

Rio Tinto has demonstrated that it can turn a profit even in challenging economic times. Its bank sheet is solid and regularly sells non-core mines to redirect capital to more promising prospects. For instance, it has just left the coal mining industry due to its dimming prospects amid climate change concerns. It also offered to purchase any further shares of copper miner Turquoise Hill Resources (NYSE: TRQ) that were not already owned by it in 2022. The agreement would make it simpler to exploit its significant copper resources and ownership of the enormous Oyu Tolgoi mine in Mongolia.

 

The corporation aggressively pursues debt repayment while routinely expanding its best mines. Another mining corporation that distributes dividends to shareholders and buys back its stock throughout an economic cycle is Rio Tinto. It makes an effort to pay dividends that range from 40% to 60% of its cash flow, with the amount paid altering every quarter based on its profitability.

3. Glencore PLC (GLNCY)

Glencore mines coal, gold, lead, zinc, copper, and other minerals. However, in its marketing or trade, the division also purchases goods from other businesses and markets them to clients worldwide. Glencore's output of copper and zinc, its two most significant commodities by tonnage, declined by 14% and 15%, respectively, in the first quarter. Nevertheless, despite the quarter's high volatility, the marketing division performed well. Glencore CEO Gary Nagle stated that extrapolating from Q1 results will result in the marketing segment's full-year profitability easily exceeding the upper end of our long-term adjusted EBIT projection range.

4 Barrick Gold Corporation (NYSE: GOLD)

Barrick Gold, one of the world's largest gold miners, is worth over $32 billion on the stock market. Despite having its headquarters in Canada, the corporation operates mining activities in 12 different nations, including Argentina, Canada, Chile, and the Dominican Republic.

 

Like most gold mining equities, COVID-19 put tremendous pressure on Barrick Gold. Unfortunately for the business, during the past year, gold prices have fallen, and the stock price of Barrick Gold has lost more than 35% of its worth.

 

However, many people see this as a chance. After all, the business outperformed profits forecasts in the previous four quarters, with high net income and earnings increases in the second quarter. The stock has been significantly undervalued compared to other gold equities due to its falls.

 

Nevertheless, there is a claim that the current market bull run may be coming to an end. The American Federal Reserve has hinted that it may gradually slow down economic stimulus shortly, and this decision may cause the market to decline. In addition, the recent bull market has resulted in significant overvaluations across the board, raising the possibility of a correction or crash.

 

As investors seek safe havens, gold prices are expected to increase if the market continues to trend lower. There is a good likelihood that Barrick Gold's stock will increase if gold prices rise.

5. Freeport-McMoRan Inc. (FCX)

Freeport-McMoRan is a significant participant among the mining stocks at the moment (FCX). The company's main areas of expertise include copper, gold, and molybdenum mining. Interestingly, FCX is one of the world's biggest publicly listed copper producers. Not to mention that the corporation now has one of the world's most significant copper and gold reserves. This would be the Indonesian Grasberg minerals district.


Additionally, it has extensive mining activities spread across North and South America, as if that were not enough. As of 1:47 p.m. E.T., the FCX stock is now trading at $41.84. Since its pandemic-era low, this reflects rises of more than 600 percent.

 

In general, the company's share price fluctuation might be attributed to the expanding demand for copper in a recovering economy. The critical problem is whether FCX can keep up this pace in the face of the present Omicron variant worries. One example is that the business just declared a $0.15 cash dividend per share. In addition, FCX's most recent quarterly earnings report showed outstanding performance across the board. The company's net income and earnings per share increased by more than 320 percent year over year. After considering everything, will you add FCX stock to your watchlist for 2022? 

6. Kirkland Lake Gold

Even though Kirkland Lake is far smaller than Newmont and Barrick, it operates in two developed nations: Australia and Canada. In contrast to Barrick, which projects 4.6 million to 5.0 million ounces of gold production in 2020, the business anticipates producing 1.35 million to 1.4 million ounces.

 

You might make the case that Kirkland Lake is in a stronger financial position than either of the titans since it currently has no debt and $540 million in cash. Credit Suisse analysts predict that this gold mining stock will create close to $1 billion in cash in 2020 and almost $2 billion in cash in 2021.

 

The recent surge in investor interest in Kirkland has been driven chiefly by its $3.7 billion acquisition of Detour Gold, completed in January 2020. Kirkland Lake could decrease expenses for an already profitable operation despite Detour's higher production costs, which may have added to the appeal. According to the most recent quarterly report, Detour was responsible for almost 40% of K.L.'s free cash flow. Kirkland might be able to increase production while maintaining Detour's cost structure.

 

This is fantastic news for stockholders who are benefiting from a prodigious dividend. In 2017, Kirkland Lake started a quarterly penny-per-share dividend that has increased multiple times, including this year, doubling to 12.5 cents per share. Despite the enormous rise, it only represents 7% of Credit Suisse's estimated 2021 earnings and just 14% of the company's expected 2020 earnings. That suggests that the area is secure and has lots of room for future treks.

7. Southern Copper Corporation

One of the biggest integrated copper producers in the world is Southern Copper Corporation (SCCO). Copper, molybdenum, zinc, coal, and silver are among the mining goods offered by the company. Mining, smelting, and refining operations are all in Mexico and Peru. Additionally, the corporation conducts exploration across South America. As of 1:47 p.m. E.T., the price of a single share of SCCO is $61.43.

 

Net revenues for the quarter were $2.68 billion, up 25.9% year over year from its third quarter fiscal. The rising demand for these metals is reflected in the rising prices of copper, molybdenum, and zinc. In addition, net income for the quarter increased by 71.5 percent year over year to $867.6 million. Increased sales and stringent cost control methods were responsible for this notable improvement. The corporation also distributed a dividend of $1.00 per share in its most recent quarter.

8. Lithium Americas

Lithium Americas (LAC, $12.82) is a pure growth-potential bet, in contrast to the mining stocks discussed before that stand out for their solid financial standing and cash flows.

 

A lithium miner in the development stage named Lithium Americas is attempting to start up two mines, one in Argentina and one in Nevada. Moreover, there is no better way to put up the element.

 

According to the metals and mining research firm Roskill, the demand for lithium will increase by 20% a year through 2030. Renewable energy sources, improvements to the electrical grid, and, of course, lithium batteries for electric vehicles are what are driving that need. Given that governments all over the globe are attempting to reduce the manufacturing of gas-powered automobiles, which should increase demand for lithium batteries in the future, investors are exceptionally upbeat on the latter front.

 

As Tesla (TSLA) writes on its website, "Tesla alone will require today's worldwide supply of lithium-ion batteries to scale manufacturing to 500,000 cars per year."

 

With a long-term debt of $158 million, which is more than quadruple its cash on hand of $50 million, Lithium Americas does not have a balance sheet as strong as those of these other businesses. According to S&P Global Market Intelligence statistics, it is also consuming cash rather than producing it, spending nearly $86 million over the last 12 months.

 

Furthermore, remember that electric cars have a past rife with hype, which may affect their suppliers' success (or failure). For instance, when Tesla CEO Elon Musk hinted that his E.V. business would mine its lithium, LAC shares plummeted in September. Since then, its value has doubled, then depreciated by another 25%.

9. Newmont Corp (NEM)

Consider Newmont, the largest gold miner in the world based on production ounces, for a purer take on gold. Gold's value in U.S. dollars is one factor contributing to its propensity to perform well during inflationary periods. Gold becomes more affordable for individuals using other currencies as the value of the dollar declines, potentially increasing demand. Newmont's shares have fallen along with gold's current downturn due to higher interest rates that make U.S. government debt more alluring. However, they are still up around 6% this year as of May 17.

10. Metals X Ltd.

Metals X is an Australian business that operates tin mines and engages in the exploration and development of metals mining locations. The Wingellina Nickel-Cobalt Project is one of the Australian locations where the corporation focuses its efforts.

Things to Keep in Mind Before Buying Mining Stocks

Concentrate on politically stable areas 

In general, we steer clear of mining firms doing business in unsafe and politically tumultuous areas like Venezuela or nations with little regard for private property rights and the rule of law, like Russia or Mongolia. Mining is inherently a politically unstable industry; you cannot relocate the mine, and residents occasionally feel like a foreign mining company is robbing them of their birthright, even though they depend on the capital and expertise of the foreign company to extract any value from the ground.

Invest in mining stocks as an inflation hedge

In order to protect themselves against inflation, many investors acquire mining companies, especially gold stocks. Additionally, certain mining firms provide dividends. Nevertheless, most mining equities also provide an inflation hedge since they grow in tandem with inflation and commodity prices.

Target a dividend yield

Due to their steadier demand and more consistent pricing, copper equities often have larger dividend yields than gold stocks. Additionally, when comparing their profits and cash flow, they are typically far less expensive than gold stocks. Thus, if markets decline generally, they could have less room to fall. They may be less dangerous than gold, which is another way of stating the same thing.

Think about investing in mining ETFs, particularly those for gold and silver

2019 has seen a general upward trend for gold and silver prices. Although they are expected to remain volatile, they may increase much more in the long run if inflation or widespread political and economic unrest harms important currencies like the euro or the dollar. Many exchange-traded funds provide top-tier international miners and affordable fees if you wish to hold various gold or silver companies.

Should You Buy Mining Stocks?

The mining business is capital-intensive and cyclical. During economic prosperity, mining corporations have more money to spend on new mines and expansion plans. However, mining businesses frequently have issues due to the long lead periods needed to execute projects. Returns are impacted when projects established during boom times do not start until the cycle has changed.

 

Investors in mining equities should also pay particular attention to a mining company's debt load. If the economy is poor, companies with lots of debt may struggle, but those with low production costs will do well and will not need to borrow as much money to grow.

 

Investors should concentrate on the best mining stocks in light of these difficulties, and they have demonstrated that they can turn a profit no matter the state of the economy. Including high-quality mining stocks in your portfolio may be the correct choice if you do not mind some volatility and prioritize dividend payments.

Are Mining Stocks a Good Investment?

Investors in mining companies should be very conscious of the cyclicality and capital-intensiveness of the mining business. The finest mining firms have a track record of making money regardless of the state of the economy. Including high-quality mining stocks in your portfolio might be the correct choice if you do not mind a little volatility and prioritizing dividends.

Final Thoughts

Mining stocks may be quite volatile to invest in, but they frequently yield positive returns over the long run. They could be well-known stars or natural jewels, but they all have one thing: they have been growing faster than average for years or decades within the mining sector or the market.