Precious and industrial metals have had a banner year on a weak dollar and the beginnings of what appears to be another upcycle for commodities. Strong demand and questions about the availability of long-term supply are pushing up prices across the board.
- Gold prices are up sharply since touching a low point at the end of 2016.
- Copper prices have soared, particularly since June. Spot prices are up nearly 20 percent in the past four months.
- Lithium prices have doubled in the past year and a half, and are up 50 percent since April 2017 alone.
- Cobalt prices have more than doubled over the past year.
Better yet, all of these commodities still have a long way to go before they reach their peak. A combination of global instability, strong demand, and a tidal wave of investment in consumer electronics and electric vehicles will ensure the markets for a long list of commodities remain incredibly tight.
Here are our top 5 mining picks right now:
#1 Barrick Gold (NYSE: ABX)
Gold is up sharply since the 2016 U.S. Presidential election, but there is still plenty of room on the upside. The U.S. is taking a confrontational stance with North Korea, threatening nuclear war. At the same time, the Trump administration has tried to tear up the Iran nuclear deal, putting both countries back on a war footing. Gold loves global chaos because investors flock to safe haven assets in times of turmoil.
Barrick Gold is a $20-billion market cap company, and the world’s largest gold producer—is one of the best bets for investors. Barrick teamed up with Goldcorp earlier this year, a deal that will see Goldcorp front much of the costs on several mining projects in Chile, a move that will reduce risk for Barrick. Barrick has made a name for itself as a prudent operator, successfully taming debt, cutting costs and generating impressive cash flow figures. Out of all of the top gold miners, it also has one of the lowest cost structures in the entire industry.
There are also a series of near-term catalysts that could propel the company’s stock up further. It recently cut a deal with the government of Tanzania, reducing its stakes in gold mine. The news led to a sharp fall in the company’s stock. But that simply offers investors a mouth-watering opportunity to buy into the largest gold miner in the world. More asset sales would also translate into lower debt and a stronger cash position.
#2 Quantum Cobalt (CSE:QBOT; OTC:BRVVF)
Cobalt prices have skyrocketed over the past year, as soaring demand runs headlong into supply problems. Cobalt is a crucial metal needed in the manufacturing of batteries needed for consumer electronics and, especially, electric vehicles. With the sale of EVs set to leap from a few hundred thousand per year to tens of millions in the coming decades, there is scramble for the world’s cobalt supplies. There is already a supply gap of about 3,320 tons, according to Research and Markets. But the gap will quadruple to 12,000 tons over the next four years.
The problem is that nearly two-thirds of the world’s cobalt supply comes from war-torn Democratic Republic of the Congo (DRC). That means that cobalt producers are wary of investing there, both because of instability and because of the reputational damage from sourcing commodities from violent places where mines operate in inhumane conditions.
That has placed a premium on other sources of cobalt supply. At the top of the list for investors should be Cobalt, Ontario, an area that has seen an influx of interest from cobalt suppliers. Quantum Cobalt (CSE:QBOT; OTC:BRVVF) is at the center of it all, and it has some of the most exciting prospects at the heart of the cobalt rush. Quantum’s Nipissing Lorrain Cobalt Project is the site of a former mine, and recent surveys have found cobalt mineralization at 22 percent, a staggering concentration given that most projects are viewed as highly valuable with mineralization at just 0.05 percent.
Quantum also has two other exploration projects in the works, including its Rabbit project just to the north, which has cobalt mineralization of 8.76 percent. It also has a large 1,200-hectare prospect at the Kahuna Cobalt-Silver project. With crews currently conducting exploration work on these assets, the soon-to-be-released results could spark a stock price rally.
Cobalt will be central to the mass adoption of EVs, ensuring steadily rising prices. Quantum Cobalt is one small company strategically located at the next hot spot for cobalt production.
#3 Rio Tinto plc (NYSE:RIO)
Rio Tinto (NYSE: RIO) is one of the largest mining giants in the world, making it an obvious choice for investors. It also lacks the baggage of a company like BHP Billiton (NYSE: BHP), which has struggled to justify some of its ill-timed investments in U.S. shale, assets the company is now hoping to unload. Rio Tinto has kept its eye on its bread and butter – iron ore, aluminum and copper – and has avoided some of the pitfalls that its peer has.
But Rio also has an extremely attractive investment case in its own right. It has expanded iron ore production this year at its flagship Pilbara project in Australia, with more capacity coming online in 2018. A second mine (bauxite) in Australia is scheduled to reach completion in the first half of 2019. In 2020, Rio Tinto will bring an exciting copper mine online in Mongolia.
Rio Tinto’s share price is up about 25 percent this year, and it has even raised its dividend significantly in order to reward shareholders. With prices for aluminum and copper sharply higher, Rio’s fortunes will continue to trend up.
#4 Teck Resources Ltd. (NYSE:TECK)(TSX:TECK)
For investors looking to diversify their risk a bit, Teck Resources offers a lot of safety. Like Rio Tinto, Teck Resources has its hand in several hot commodities – copper, zinc and metallurgical coal.
Thermal coal (for power plants) has some troubling long-term prospects, but met coal (used for steel) will fare much better. Prices have jumped sharply as the Chinese government forced a lot of capacity to shut down. That has tightened global supply significantly, and sparked a dramatic rally in 2016. Prices are back down more recently, but not to the lows seen from several years ago.
Meanwhile, Teck has strong earnings from soaring zinc and copper prices, two metals that will be instrumental in the EV boom going forward. At the same time, Teck has diversified into Canada’s oil sands, which, despite a lot of negative press, has a long shelf life. The Fort Hills project is about to come online – before the end of the year – and will achieve 90 percent of planned production of 190,000 bpd within 12 months. Teck has a 20 percent stake in Fort Hills, a project that is expected to produce oil for the next 50 years.
In short, Teck offers investors a range of revenue streams, a hedge against volatility in any one segment.
#5 Albemarle (NYSE: ALB)
Albemarle is the world’s largest producer of lithium, another commodity that has seen explosive demand growth. Earlier this year, Albemarle received approval to expand its Greenbushes mine in Australia, which could be commissioned by 2019. Greenbushes is the world’s largest active lithium mine.
In fact, Albemarle has aggressive plans to expand its lithium output – and the company already controls about 35 percent of global lithium production. It has mines in Chile, Australia and Nevada – close to Tesla’s gigafactory. Albemarle has a $16 billion market cap, and its share price is up by nearly 75 percent this year alone. It hiked its dividend and sees nothing but clear skies ahead.
Lithium prices have spiked over the past two years, and the eye-watering demand for this commodity is only in its beginning stages. For investors looking to ride the lithium wave, who better than the world’s largest lithium producer?
Other miners to watch:
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.
First Majestic Silver (TSX:FR): There’s a lot of bullishness around this stock, with earnings growth expected to be high over the next 3-5 years. The optimism is absolutely justified as this Canadian mining company has been operating in Mexico for nearly a decade and has over $770 million in assets including 5 of the most promising locations in the country.
As all types of commodities continue to see a surge in demand, silver is no exception and investors are turning to First Majestic Silver as a safe entry into this market.
Enbridge, Inc (TSX:ENB), based in Canada’s oil sands capital Alberta, is an energy delivery company focusing on transportation, distribution, and generation of energy. Operating in the United States and Canada, Enbridge owns and operates the largest natural gas distribution network in Canada and the longest crude oil transportation system in the world. Founded in 1949, investors can feel confident in Enbridge’s experience and market know-how.
Though not strictly dealing in commodities like gold, lithium, silver, and cobalt, Enbridge’s diversified assets and connections to a variety of industries position the company as solidified player in many Canadian investors’ portfolio and will certainly play a role in the next energy revolution.
First Quantum Minerals Ltd. (TSX:FM) is a Vancouver, British Columbia based mining company that engages in exploration, mining and refining. First Quantum focuses on Copper, Gold, Zinc and Nickel and has a large presence in Zambia.
While the company struggles to become profitable, it managed to significantly increase operational efficiency in Q3 2017. While the current trend is looking down, the current drop in share price could prove to be an opportunity for resource investors.
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Forward-Looking Statements
This communication 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 cobalt demand will increase in the future, and potentially by 14,900% by 2030; that cobalt supply will not be able to catch up to future increases in demand; that one of the biggest beneficiaries in the EV supply chain will be cobalt miners and, specifically, new entrants that develop new supplies that are safe and ethical; that cobalt prices could go even higher than current levels; that rapid news flow on prospecting, geologic mapping, geochemical mapping, geochemical surveying and sampling to locate and delineate mineralized structures can be expected from Quantum Cobalt Corp. (“Quantum Cobalt”); and that this year will be the year in which cobalt leaves Africa and is relaunched in Canada. Risks that could change or prevent these statements from coming to fruition include: that cobalt demand will not increase, as expected, in the future; that cobalt supply will be able to catch up to future increases in demand; that one of the biggest beneficiaries in the EV supply chain will not be cobalt miners or that new entrants developing new supplies that are safe and ethical will not benefit from the EV supply chain; that cobalt prices will not go higher than current levels; that rapid news flow on prospecting, geologic mapping, geochemical mapping, geochemical surveying and sampling to locate and delineate mineralized structures will not be forthcoming from Quantum Cobalt; and that this year will not be the year in which cobalt leaves Africa and is relaunched in Canada. 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 statements. The forward-looking statements contained in this communication reflect the current expectations, assumptions and/or beliefs of the writer based on information currently available to the writer. In connection with the forward-looking statements contained in this communication, the writer has made assumptions about: future increases in cobalt demand; the ability of cobalt supply to catch up to future increases in demand; the biggest beneficiaries in the EV supply chain, going forward; future cobalt prices; Quantum Cobalt’s future news flow; and the fact that this year will be the year in which cobalt leaves Africa and is relaunched in Canada. The writer has also assumed that no significant events will occur outside of Quantum Cobalt’s normal course of business. Although the writer believes that the assumptions inherent in the forward-looking statements are reasonable, the forward-looking statements are not a guarantee of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein. The forward-looking information contained herein is given as of the date hereof and the writer assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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