2 Miners to Buy and 1 to Avoid

In this industry, you don’t want to be stuck with the wrong company.

| More on:
The Motley Fool

There are few sectors more dangerous to invest in than mining. Mining companies routinely have to face issues such as falling commodity prices, skyrocketing costs, balance sheet risk, and geopolitical nightmares. When the operating environment isn’t ideal, shareholders can feel a lot of pain.

That being said, some miners are better positioned than others to deal with these risks. Also, there’s always a flip side — if a miner is able to exceed expectations, then shareholders can profit very handsomely. On that note, below are two miners that look to be very well positioned, as well as one you should stay away from.

Two to buy

1. Cameco

There are few commodities with a more depressed price than uranium. After trading above U.S.$70 per pound in early 2011, the price has fallen below $30, where it remains today. The main cause has been the decreased use of nuclear power after the Fukushima disaster, as well as stubbornly strong supply.

However, with prices so low, it’s only a matter of time before demand recovers. In the meantime, countries like Japan are having to rely on higher-cost alternatives like liquefied natural gas. Supply must eventually come down; too many producers are losing money as it stands. If and when those two things occur, uranium’s price should recover, and Cameco’s (TSX: CCO)(NYSE: CCJ) shareholders stand to benefit.

2. First Quantum

Of all the large miners on the TSX, copper miner First Quantum Minerals (TSX: FM) has by far the best track record. The company has managed to do two things not seen very often in mining: Buy assets cheaply, and keep costs under control. Its stock price tells the story — over the past 15 years, its shares have returned 39% per year.

Importantly, First Quantum is continuing to grow production after the recent acquisitions of Inmet and Lumina. As long as the company grows efficiently, as it has done in the past, then its shares should continue to perform.

One to avoid

Barrick Gold

The past 15 years have been a different story for shareholders of Barrick Gold (TSX: ABX)(NYSE: ABX), with the shares returning -0.39% per year — and this was a time period when gold prices skyrocketed.

Barrick has of course made numerous missteps. It hedged gold prices at the wrong time, made poor acquisitions, lost control of costs, botched the Pascua Lama project, and got stuck with too much debt as gold prices fell. If you’re looking to bet on gold, then you should buy an ETF; this is not the kind of company you should want in your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Investing

Senior housing

3 Lesser-Known Reasons to Invest in an RRSP

The RRSP has so many more benefits that investors might be unaware of, and can be used for your benefit…

Read more »


TFSA Blueprint: 4 Canadian Stocks to Secure Your Future

Successful TFSA investing requires four steps and four Canadian stocks to secure your future.

Read more »

gas station, car, and 24-hour store
Energy Stocks

Is it Too Late to Buy Suncor Stock?

Suncor Energy stock has rallied big in the last year, but expect it to move higher as efficiencies keep rolling…

Read more »

Payday ringed on a calendar
Dividend Stocks

TFSA Monthly Money: How to Generate Consistent Tax-Free Passive Income

Adding these two attractive Canadian dividend stocks to your TFSA now could help you earn reliable monthly passive income for…

Read more »

analyze data
Dividend Stocks

3 Magnificent TSX Dividend Stocks to Buy and Hold Forever

Do you want to hold some quality dividend stocks for the decades ahead? Here are three stocks worth holding for…

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Tech Stocks

Up 51% This Year: This Canadian AI Stock is Still Down 65% From Its Highs – Time to Buy?

Copperleaf Technologies (TSX:CLPF) stock has shown positive momentum as the AI stock attempts a recovery. Can shares rise 180% to…

Read more »

Oil pipes in an oil field
Energy Stocks

TSX Energy Sector: Best Stocks to Buy in May 2024

Energy stocks like Suncor are generating massive amounts of cash flows and paying out significant dividends.

Read more »

Dividend Stocks

How Much Will Canadian Utilities Pay in Dividends This Year?

Investors can stabilize their long-term stock portfolio returns by accumulating quality utility stocks on meaningful dips.

Read more »