Last year was a good one for the mining industry.
The top fifty firms saw their value increase by $141 billion, with total value of $896 billion by year’s end.
In the last 18-months, shareholders have seen an increase of $227 billion.
And in December 2017, a bunch of commodities stocks saw an impressive bump, indicating market confidence in tight supply and high demand in 2018.
Economies around the world are booming, after years of struggle and tepid growth.
Throughout the mining industry and the commodities sector, stocks surged at the end of 2017.
That’s led many analysts to predict that commodities will be the hot investment option of the new year.
The opportunities in this normally-volatile sector could be at an all-time high.
But how can investors pick the winners?
Here are five companies that are worth watching in 2018:
1. Wheaton Precious Metals Corps. (NYSE: WPM)
In the volatile mining sector, Wheaton Precious Metals Corps. has risen above its competition by offering regular dividends to investors.
The company has a dividend model based on returning 30 percent of the cash generated through operations over a twelve-month period.
That has delivered regular earnings for investors from a sector that is usually marked by boom-and-bust oscillations.
The world’s major “streaming” mining company, Wheaton is increasing its activities. It recently announced a purchase agreement with First Majestic Silver Corp. Wheaton will take on shares of First Majestic equal to $151 million.
While the company’s stock lagged somewhat in 2017, it closed the year with 14.5 percent in gains, an overall strong performance.
Some of those gains have come from the company’s shift in focus, from silver to gold. As gold’s share in the company’s bottom line continues to rise, it’s likely that this stock will continue to gain on its 2017 performance.
2. Fura Gems (TSXV: FUR.V)
For Fura Gems, the real story isn’t diamonds, or gold: it’s the colored gemstones market.
This mining company has just purchased a mine in Coscuez, Colombia, a mine which in the past uncovered a massive 1759-carat emerald, the largest ever discovered.
The huge stone has been nick-named the “Guinness Emerald,” on account of its shattering the Guinness World Record.
While the diamond market has slipped somewhat, with interest in diamonds declining among younger generations, colored gemstones like rubies, emeralds and sapphires are more popular than ever.
Prices for colored stones like emeralds have increased by 100 percent in the past decade, while the sale of rubies and sapphires out-paced diamonds in terms of growth between 2005 and 2013.
If interest in diamonds continues to falter, investment may shift to the colored gemstones market. And Fura Gems is superbly positioned to take advantage of that shift.
The company operates the Coscuez mine in Colombia, which has been in operation for more than four hundred years. The mine once produced 77 percent of all the emeralds in Colombia, which is the world’s leading emerald producer.
Fura has lots of ore waiting to be mined on its 46-hectare lot.
The Guinness Emerald, based on per-carat emerald prices that go as high as $9,800, could be worth $17 million in today’s prices. That is just one emerald gem!
And the Coscuez Mine still has room for lots more exploration, which means there could be millions of carats’ worth of emeralds locked away under the ground.
The company’s management is led by CEO Dev Shetty. As an executive at Gemfields Plc., Shetty performed wonders, taking the company from an annual $209 million loss to asset valuations of over $525 million within five years.
He brought the company major discoveries in Colombia and Mozambique, and he’s hoping to repeat the performance with Fura Gems.
Fura made a $10 million investment in Colombia, securing the mine where the famous Guinness Emerald was discovered.
Fura also added 4 ruby licenses in Mozambique, located next to, and part of the same geological belt as, the celebrated Gemfield licenses, which CEO Shetty knows so well.
With Shetty at the helm, Fura could repeat Gemfields performance: Gemfields realized $225 million in rough ruby sales from a mere seven auctions.
That means that Fura may be ready to outperform. Serious gem production would put Fura Gems on the map and could lead to real success.
3. Rio Tinto (NYSE:RIO)
Rio Tinto, like Anglo-American, is a giant of the mining world. The company runs dozens of different operations on four different continents and is deeply involved in the gems business.
One Rio Tinto diamond mine in Argyle, Australia has produced 800 million carats of diamonds, including the world’s largest supply of colored diamonds. The mine has been a steady producer, increasing its output from 4 million carats in 2011 to 14 million in 2016.
A second mine at Diavik, Canada produces 6-7 million carats a year.
Diamond mining is a risky business, with most mines coming up short. Rio Tinto has pumped $7 billion into exploration since 2000, and expects its two diamond mines to be exhausted in 2024.
But the company has its eyes on the future. It’s making inroads into automated mining, using robo-miners to tap into deposits that human miners can’t reach.
Even when Diavik and Argyle run out, Rio Tinto can search for new diamond finds more rapidly, and exploit them through new technologies.
Rio Tinto surged at the end of 2017 on the back of strong commodities demand, and it’s likely to keep that streak going into the new year.
4. Yamana Gold (NYSE:AUY )
A gold miner with a healthy claim in Argentina and strong growth prospects, Yamana Gold didn’t perform particularly well in 2017.
However, Yamana is going to have a good year. Its gold mine at Cerro Moro will deliver 9.5 percent growth in gold and 111 percent in silver output, totaling 1.03 million ounces and 10 million ounces respectively.
The mine at Cerro Moro has been developed on time and on budget, with total costs for 2017 coming in at $172 million. But that investment paid off, and Yamana executives now feel they are “well positioned” for further opportunities.
Shares in Yamana rose 22 percent in December, after a year of poor performance. The company was once worth $10 billion, but now it sits with a market cap of less than $3 billion.
That being said, the strong year ahead should see this stock recover a lot of its former worth. That means investors looking to get in on the ground floor should act fast.
5. Barrick Gold Corporation (NYSE: ABX)
An under-performer in 2017, Barrick Gold is likely to have a much stronger 2018, even if gold prices fall.
The company is one of the world’s largest gold producers, with 1.243 million oz. produced in Q3 of 2017. The company is projecting more than 5 million oz. for 2018.
The company runs 11 gold mines. For the last several years, Barrick has been loaded down by debt and lower-than-average gold prices. It enters 2018 after a year-long slump.
However, with lower debt and stable gold prices expected, the company enters the new year under-valued, making it a tempting target for investors.
Out of Barrick analysts, 40 percent suggest a “buy” rating, though a second survey found most analysts more bearish, with 63 percent suggesting “hold.”
Nevertheless, the company’s strong balance sheet and decreased debt should allow it to out-perform this year, as long as gold prices remain stable.
Honorable mentions:
Centerra Gold (TSX:CG): This big mid-tier gold Canadian miner realized a very competitive cost per ounce in 2016 and expects to cut costs even further in 2017. Its Kyrgyzstan operation yielded a very strong result in 2016. Next to gold, Centerra’s copper production is worth noting as prices for this metal just leapt to two-year highs, providing a nice extra income for Centerra this year.
With new deals in the making, Centerra Gold stands to continue to be a force in the Canadian stock market, and a fair bet for investors.
Royal Nickel Corporation (TSX:RNX): While investor attention is about to refocus on zinc, it’s possible that nickel is being overlooked, and while this stock has been a recent top decliner, if nickel demand growth is overlooked, RNC could be a good stock to hold.
RNC's principal assets are the producing Beta Hunt gold and nickel mine in Western Australia, the Dumont Nickel Project located in the established Abitibi mining camp in Quebec and a 30% stake in the producing Reed copper-gold mine in the Flin Flon-Snow Lake region of Manitoba, Canada.
RNC’s stock price has lagged since July, but a recent uptick in nickel prices could revive this stock once again.
First Quantum Minerals (TSX:FM) is a Canadian mining company specializing in copper. While copper may be the company’s primary focus, it also owns several gold, cobalt, and zinc producing mines. First Quantum operates mines and development projects all over the world, including Australia, Africa, Spain, Finland, Turkey, and Latin America.
First Quantum has a market value of over $13-billion, and analysts are becoming increasingly bullish about the company.
Fortune Minerals (TSX:FT) is a major player in the cobalt space. Operating in Canada’s Northwest Territories, Fortune is eyeing status as a major Canadian producer of battery-grade cobalt chemicals--but it’s also got copper and gold bismuth upside. And it’s getting a boost from the government in terms of mining infrastructure.
Fortune’s modest market cap and low buy in make it a great stock for investors looking to get a piece of the electric vehicle revolution. The company’s value has increased significantly over the past year, but it hasn’t yet reached its peak.
Endeavor Silver (TSX:EDR) operates three silver-gold mines in Mexico, but it’s also got three attractive development projects. Production has dropped, and all-in sustaining costs have risen, leading to a negative cash flow. But the company has significantly reduced its debt, so its future is anything but bleak.
By 2018, with development in the pipeline, this stock might be prohibitively expensive again because there is plenty of near-term growth potential here. It’s also got further upside with zinc and should get a boost in this coming bull market. Catalysts include positive reserve estimates for its fifth mine, the Terronera silver/gold project in Mexico’s Jalisco state.
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Forward-Looking Statements
This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that Fura’s property can achieve mining success for quality gemstones; that the gems when produced will be high quality; that tastes will move away from diamonds to colored gems; that Fura will be able to increase production through modern methods and increase the value of its assets through branding and auction sales; and that Fura will be able to carry out its expansion and other business plans. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the Company may not be able to finance its acquisitions, expansion or other business plans, aspects or all of the properties’ development may not be successful, mining of the gems may not be cost effective, changing costs for mining and processing; increased capital costs; marketing plans may not work out as well as expected; the timing and content of work programs may change; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumptions based on limited test work with further work may not be viable; additional high value gem properties may not be available for Fura to acquire, or Fura may not be able to afford them; competitors may offer better quality or better marketing strategies; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of its projects, that the gems cannot be economically produced on its properties, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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