Can These Miners Repeat Their YTD Performance: Glencore PLC (+60%), KAZ Minerals PLC (+68%) & Fresnillo Plc (+30%)

Can Glencore PLC (LON: GLEN), KAZ Minerals PLC (LON: KAZ) and Fresnillo Plc (LON: FRES) repeat their year-to-date performance?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

After a dismal performance during the second half of last year, shares in Glencore (LSE: GLEN), KAZ Minerals (LSE: KAZ) and Fresnillo (LSE: FRES) have been on a tear this year.

Indeed, year-to-date Glencore’s shares are up 60%, Kaz’s shares have gained 68%, and Fresnillo’s equity has risen 30%. However, some City analysts have cautioned that the share prices of these miners may have risen too far too fast, and investors shouldn’t expect a repeat of the recent performance. 

But is this really the case or are City analysts just being too cautious?

Cautious optimism

There’s been no real change in the underlying fundamentals of the mining industry since the end of last year. Concerns about China’s economy remain and many commodity markets are still oversupplied.

What’s more, at the company level, many miners continue to follow the strategic plans they set out last year. So, why has the market suddenly decided that these firms are worth significantly more than they were a few months ago?

Well, it looks as if the market is rebalancing after the capitulation that took place towards the end of last year. It seems as if investors are now viewing the mining sector with a degree of cautious optimism, although there are still a few miners that investors are giving a wide berth.

Nonetheless, Glencore, Kaz and Fresnillo are three best-of-breed miners that are well placed to ride a recovery in commodity prices. Glencore, for example, has its trading division and the company has proven that it’s committed to its strategic debt reduction goals. The company is targeting $13bn in debt reduction by the end of 2016 and has already raised $9bn.

Meanwhile, Kaz is one of the world’s lowest-cost copper producers. Gross cash costs were 230 USc/lb, below guidance of 260 to 280 USc/lb for the year ended 31 December 2015. The company is projecting copper production growth of over 50% per annum to 2018 and with its low cost base, the majority of this growth should be profitable. City analysts are expecting the company to report a small pre-tax loss of £6.5m this year but next year revenue is set double and pre-tax profits could hit £82m with earnings per share of around 11p.

Gold and silver miner Fresnillo has been insulated from the commodity slowdown as gold and silver prices have remained relatively stable. Of course, the company’s prospects are still tied to the price of the aforementioned precious metals, but year-to-date the price of silver is up by nearly 10%, and gold has gained approximately 20%. City analysts expect the company to report earnings per share of 17.6p this year, putting the shares on a forward P/E of 55.7.

Bottom line

All in all, only time will tell if these miners can repeat their year-to-date performance. However, here at the Motley Fool we invest with a long-term outlook and based on their industry-leading qualities, Glencore, Kaz and Fresnillo could all be great long-term plays on a mining sector recovery.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

Just released: our top 3 small-cap stocks to consider buying in October [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

How I’d use an empty Stocks and Shares ISA to aim for a £1,000 monthly passive income

Here's how using a Stocks and Shares ISA really could help those of us who plan to invest for an…

Read more »

Investing Articles

This FTSE stock is up 20% and set for its best day ever! Time to buy?

This Fool takes a look at the half-year results from Burberry (LON:BRBY) to see if the struggling FTSE stock might…

Read more »

Investing Articles

This latest FTSE 100 dip could be an unmissable opportunity to pick up cut-price stocks

The FTSE 100 has pulled back with the government’s policy choices creating some negative sentiment. But this gives us a…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

As the WH Smith share price falls 4% on annual results, is it still worth considering?

WH Smith took a hit after this morning’s results left shareholders unimpressed. With the share price down 4%, Mark Hartley…

Read more »

Investing Articles

The Aviva share price just jumped 4.5% but still yields 7.02%! Time to buy?

A positive set of results has put fresh life into the Aviva share price. Harvey Jones says it offers bags…

Read more »

Investing Articles

Can a €500m buyback kickstart the Vodafone share price?

The Vodafone share price has been a loser for investors in recent years, and the dividend has been cut. We…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Growth Shares

3 mistakes I now avoid when choosing which growth stocks to buy

Jon Smith runs through some of the lessons he's learnt the hard way over the years about what to look…

Read more »