The TSX30 came out recently, and while the number one growth name went to a technology stock, the second place was perhaps more surprising with a mining stock taking that top spot. However, scroll down and you’ll see quite a lot of mining stocks hitting the top list over the last three years. So, what’s going on? And are there mining stocks investors can still benefit from?
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What happened
Momentum continues to build in the mining sector, yet it’s not simply because of one market mover. In fact, there are multiple reasons behind today’s share price increase for miners. Yet of course, the most obvious comes from gold.
Gold has taken off, surging to US$4,000 per ounce this week. Macro risks like inflation and geopolitical uncertainty are all elevated, with capital increasingly flowing into safe haven assets such as gold. Mining and gold stocks, therefore, benefit from an investment in this area.
Yet gold isn’t alone, with copper also becoming a major winner for mining stocks. Copper and other base or critical metals are getting renewed attention thanks to the energy transition, electric vehicle needs, and infrastructure demand. Some copper miners have seen supply pressures mount, leading to an excellent buying opportunity. So, which stock stands to win?
TECK
When it comes to winners in this area, Teck Resources (TSX:TECK.B) could be a huge winner for today’s investor. Teck is a diversified mining company, spanning steelmaking coal and zinc, to copper and even energy. As a result of the diversification, it is not a pure play, but it does give it resilience. It seems this is what Anglo American liked about the company, recently announcing a merger of equals between the two.
The new “Anglo Teck” is expected to tilt heavily towards critical minerals. In fact, it would offer more than 70% exposure to copper. The best part? It will still operate out of Canada, leading to even more growth for our country. The merger is valued at US$53 billion, with Anglo shareholders owning 62.4% and Teck 37.6%. What’s more, the new stock should achieve about US$800 million in annual cost synergies by the fourth year.
Meanwhile, Teck has made some changes. The miner lowered its copper guidance at its QB mine, trimming the output owing to tailings disposal issues. While negative on the surface, revisions are now aligning with Anglo’s prior assumptions, making the merger more robust. Though all considered, it’s still a solid investment while the companies look to combine.
Bottom line
When it comes to TSX mining stocks gaining momentum, Teck stock certainly belongs on that list. The mining sector is seeing renewed interest as macro conditions favour it, with valuations allowing for upside. And now, major names are breaking out. However, momentum is fragile and can reverse easily, and if interest rates stay higher for longer, the rally in precious metals could stall. That’s why it’s important to look to solid investments like Teck instead. It’s an interesting bet as it straddles traditional resource exposure and critical minerals, and the major merger could reshape the future.
