These 3 mining stocks are up 30%+ already this year

Should you play the commodities rebound with these soaring mining shares?

| 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.

Just two months into 2017, these three mining stocks have already gained more than 30%.

Huge potential

SolGold (LSE: SOLG), an Australian gold and copper mining company listed on the alternative investment market (AIM), has seen its share price soar on growing optimism with its Cascabel copper and gold discovery.

There’s mounting evidence that the Cascabel deposit in Ecuador has the potential to rival the scale of the largest existing mines, such as Grasberg in Indonesia and Oyu Tolgoi in Mongolia. Such new discoveries of large copper deposits have become extremely rare in recent years and big miners have had to spend bigger sums on exploration.

But while the potential rewards of investing in a potentially huge copper mining prospect are considerable, SolGold is still at a very early stage. Certainly, the stock has benefited from positive news flow in recent months, but we shouldn’t ignore the possibility of setbacks. Moreover, a lot of the upside seems priced in, after a 1,446% surge in its share price over the past 52-weeks.

Growing free cash flow

Meanwhile, Russian gold miner Highland Gold Mining (LSE: HGM) may have a simpler investment case. The AIM-listed miner already has three operating mines and last year produced over 261,000 ounces of gold. It is generating growing levels of free cash flow, which will no doubt help efforts to develop its pipeline of low-cost projects in the largely untapped Eastern Siberia and Far East regions.

With total costs of $444 per ounce and all-in sustaining costs of $609 per ounce, Highland is on the very low end of the industry cost curve. What’s more, the miner has an ambitious growth strategy — it’s target is to roughly double production to 500,000 annually by 2020, by expanding capacity around existing production clusters and developing a potentially bigger prospect in the remote Chukotka autonomous region in the Russian Far East.

Highland has yet to release its full-year results, but judging from its recent production update and strong first half performance (operating profits more than doubled to $50.4m, from $18.8m H1 2015), I expect a big hike in profits to be announced for FY 2016 due to the increase in output, improved pricing and strict cost control.

Rapid expansion

It’s not just small-cap miners that have seen the value of their shares soar. Shares in KAZ Minerals (LSE: KAZ), the Kazakhstan-based copper miner which was formed out of Kazakhmys, have gained 45% year-to-date.

Kaz Minerals, which had spun-off its high cost copper production assets to focus on a series of low cost growth project, is beginning to deliver the results where it counts. After roughly $3.5bn of investment in its two key open pit copper projects Bozshakol and Aktogay in Kazakhstan, copper production is expanding rapidly — last year, copper production rose by 73% to 140,000 tonnes. What’s more, the company is on track to reach its target in annual production of 300,000 tonnes by 2018.

Shares in Kaz Minerals seem fairly valued, with a forward P/E of 12.0, falling to just 7.2 for 2018. However, the stock will likely disappoint on the dividend front. With net debt of $2.67bn and a capital spending budget of $700m for the next two years, dividends just aren’t a major priority. City analysts seem to agree, with the majority expecting the company to pay nothing to shareholders for at least another two more years.

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.

Jack Tang 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

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »