Russia’s invasion of Ukraine and subsequent sanctions on Russia led to disruptions in the supply of several vital commodities, thus driving their prices higher. The increase in prices could benefit mining companies. So, given the favourable environment, I expect the following three Canadian commodity stocks to outperform this year.
Nutrien
Before the Russia-Ukraine war, Russia and Belarus produced 40% of total potash traded annually. However, with Russia temporarily suspending its outgoing trade and the European Union imposing sanctions against Belarus, potash prices have increased by over 150% this year. As a result, I have selected Nutrien (TSX: NTR)(NYSE: NTR), a major producer and distributor of potash, nitrogen, and phosphate products, as my first pick.
The company has announced it will increase its potash production capabilities to 15 million tonnes this year, one million tonnes higher than its previous expectations. Nutrien’s potash production would be 20% more than its 2020 levels with these increases. In February, the company also announced a renewed repurchase program, which would involve buying back 10% of all its floating shares.
So, increased prices, rising production, and share repurchase programs could boost Nutrien’s financials and stock price in the coming quarters. Despite its positive outlook, the company currently trades at an NTM (next 12 months) price-to-earnings multiple of 7.7. With a quarterly dividend of $0.48/share, its forward dividend yield stands 1.41%. So, considering all these factors, I am bullish on Nutrien.
Barrick Gold
Amid the ongoing Russia-Ukraine war, gold prices have increased by 7% this year. Gold prices could rise further, given the volatility in the equity markets. Goldman Sachs looks bullish on the yellow metal. It projects an upside of over 25% from these levels. Higher gold prices could benefit gold-mining companies. So, I have opted for Barrick Gold (TSX: ABX)(NYSE: GOLD), a gold and copper mining company that has mines and projects across 18 countries, as my second pick.
The company’s management expects to maintain its production of around 4.5 million ounces over the next five years. However, its ASIC (all-in sustaining costs) could fall this year. So, higher prices and decreasing expenses could drive Barrick Gold’s margins and cash flows. Besides, the company has raised its dividends by 11% to $0.10/share. Its forward yield currently stands at 1.25%. Also, Barrick Gold trades at an attractive valuation, with its price-to-book multiple standing at 1.9. So, I believe Barrick Gold would be an excellent buy right now.
Teck Resources
My final pick is Teck Resources (TSX: TECK.B)(NYSE: TECK), which is involved in the mining of copper, zinc, and steelmaking coal. Supported by higher commodity prices and impressive fourth-quarter performance, the company has returned 38% this year. However, I believe the rally could continue, as commodity prices could continue to trade at elevated levels in the near-to-medium term.
Meanwhile, Teck Resources is also focusing on increasing its production capabilities. By the end of 2021, the company had completed 77% of the construction of its QB2 project. The long-life, low-cost copper mine could become operational by the second half of 2022. Further, the company has identified the Quebrada Blanca Mill expansion as its next development project, which could become operational in 2026. So, the company’s outlook looks healthy. Notably, the company currently trades at an attractive NTM price-to-earnings multiple of 5.5. So, I believe Teck Resources would be an excellent addition to your portfolio.
