The mining industry is one of the most promising sectors for investors looking to capture high returns. Despite the turbulence in 2022, mining companies have been making strategic investments and acquisitions. With inflation finally cooling down, now could be the perfect time to unearth high-potential mining stocks.
In this article, we’ll explore three of the fundamentally sound mining stocks, namely: Fortescue Metals Group Limited (FSUGY), Impala Platinum Holdings Limited (IMPUY), and Amerigo Resources Ltd. (ARREF), that you might consider investing in July.
The global mining market grew from $2.02 trillion in 2022 to $2.14 trillion in 2023, exhibiting a CAGR of 6.1%. Further, the market is expected to reach $2.77 trillion by 2027, growing at a CAGR of 6.7%.
As countries invest heavily to meet their net-zero climate goals, clean energy demand for critical minerals such as copper, lithium, nickel, cobalt, and rare earth elements is set to soar. Experts predict that a faster transition to hit net zero globally by 2050 would require six times more mineral inputs in 2040 than today.
The burgeoning demand for metals like lithium, spurred by the EV industry’s supply chain, has created a lucrative opportunity for the mining sector to capitalize on. According to a public-private alliance Li-Bridge, the global demand for lithium batteries is expected to skyrocket more than five-fold by 2030. The U.S. market alone is forecasted to grow more than six times, amounting to $55 billion annually by the decade’s end.
Furthermore, emerging trends, from the rise of renewable energy to the increasing use of automation and digitalization, have equipped mining companies to stay ahead of the curve and remain competitive. By investing in mining stocks, you can leverage the ongoing growth in the mining sector and capitalize on the opportunities presented by the EV industry.
So, let’s dive in and explore these quality mining stocks that look poised to deliver significant returns in the upcoming months.
Fortescue Metals Group Limited (FSUGY)
Based in East Perth, Australia, FSUGY engages in the exploration, development, production, processing, and sale of iron ore. It explores copper and gold deposits and also provides port towage services. In addition, the company holds a portfolio of properties in Ecuador, Argentina, Colombia, Peru, Chile, Brazil, Portugal, and Kazakhstan.
On June 14, FSUGY signed a Memorandum of Understanding (MoU) with China Baowu Steel Group Corporation to jointly focus on emissions reduction in the iron and steel industry. The two companies will collaborate on several initiatives to reduce emissions in iron production.
FSUGY’s CEO Fiona Hick commented, “This MoU further strengthens our longstanding partnership with China Baowu, the world’s biggest steel maker and Fortescue’s largest customer, and reflects our collective commitment to eliminate emissions.”
In the same month, FSUGY entered into a significant partnership with the Nyamal traditional custodians by agreeing to supply mining equipment for the company's Iron Bridge Magnetite Project. This agreement, valued at $18 million, strengthens the relationship between FSUGY and Nyamal businesses, which have already been awarded contracts worth $331 million since 2019.
The initiative demonstrates FSUGY’s commitment to sustainability and could lead to new business opportunities and increased revenue.
For the six-month period that ended December 31, 2022, FSUGY’s operating sales revenue amounted to $7.84 billion. During the same period, its operating profit and net profit after tax stood at $3.46 billion and 2.37 billion, respectively.
In addition, its net cash flow from operating activities and cash and cash equivalents at the end of the period came in at $2.95 billion and $4 billion, representing a 38% improvement year-over-year. Also, its total current liabilities amounted to $2.09 billion, declining 13.2% compared to $2.42 billion as of June 30, 2022.
Analysts expect FSUGY’s revenue for the fiscal year 2023 (ended June 30) to be $16.78 billion. In addition, its revenue has grown at CAGRs of 9.8% and 17.5% over the past three and five years, respectively. Likewise, its EBITDA and total assets have increased at CAGRs of 5.9% and 9.5% over the past three years, respectively.
The stock has gained 32.4% over the past nine months to close the last trading session at $29.88.
FSUGY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value, Stability, and Quality. Among the 43 stocks in the Miners - Diversified industry, it is ranked first. Click here to see FSUGY’s ratings for Growth, Momentum, and Sentiment.
Impala Platinum Holdings Limited (IMPUY)
Based in Sandton, South Africa, IMPUY produces and supplies Platinum Group Metals (PGMs) to industrial economies. It produces platinum, palladium, rhodium, ruthenium, iridium, gold, silver, nickel, copper, and cobalt. Also, the company has structured around six mining operations and holds various mining and exploration activities.
IMPUY’s revenue for the six months that ended December 31, 2022, increased 3.9% year-over-year to R57.79 billion ($3.09 billion). Its EBITDA grew 2.1% from the year-ago value to R24.51 billion ($1.31 million), while its profit for the period increased 3.1% from the prior-year period to R14.83 billion ($792.94 million).
In addition, its cash and cash equivalents of R27.02 billion ($1.45 billion) increased 45.8% year-over-year versus R18.54 billion ($991.35 million) as of December 31, 2021.
IMPUY is expected to witness revenue growth of 3.4% for the fiscal year 2024 to reach $6.01 billion, while the consensus revenue estimate for the current year (ended June 30, 2023) is expected to be $5.81 billion. Moreover, its EPS is projected to increase by 35.7% per annum over the next five years.
Its revenue and EBITDA have increased at CAGRs of 31.4% and 52.1%, respectively, over the past three years, while its levered FCF has grown at a 72.4% CAGR.
Shares of IMPUY have lost marginally over the past five days to close the last trading session at $6.83.
IMPUY’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It also has a B grade for Value, Momentum, Stability, and Quality. Within the same industry, it is ranked #4. Click here to see the additional ratings for IMPUY (Growth and Sentiment).
Amerigo Resources Ltd. (ARREF)
Headquartered in Vancouver, Canada, ARREF produces and sells copper and molybdenum concentrates from Codelco's El Teniente underground mine in Chile through its Minera Valle Central S.A. (MVC) subsidiary.
Recently, the company provided an update regarding operations at MVC, which was temporarily disrupted on June 23 following a significant climatic event that affected central Chile. Repairs are underway, and full production is expected to resume around July 10, two weeks ahead of the initial estimate. The company expects to meet its annual guidance of 1.0 million lbs of molybdenum with the resumption of production.
On June 20, backed by its strong financials, ARREF paid its shareholders a quarterly dividend of C$0.03 per share. The company’s annual dividend translates to a 7.33% yield on the prevailing prices, while its four-year average dividend yield is 2.55%.
ARREF’s revenue for the first quarter (ended March 31, 2023) amounted to $52.65 million, while its EBITDA stood at $18.46 million. During the same period, its net income and EPS came in at $9.09 million and $0.05, respectively. Also, its cash and cash equivalents stood at $43.92 million, up 16.1% compared to $37.82 million for the period that ended on December 31, 2022.
The consensus revenue estimate of $34.92 million for the second quarter (ended June 30, 2023) reflects a 3.9% increase year-over-year. Moreover, it surpassed the revenue estimates in three of the trailing four quarters, which is impressive.
Over the past three years, ARREF’s revenue and levered FCF have grown at CAGRs of 15.7% and 18.8%, respectively. Likewise, its EBITDA has improved at an impressive CAGR of 84.9% over the same period.
ARREF’s shares have gained 63.6% over the past nine months to close the last trading session at $1.20.
It’s no surprise that ARREF has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Value and Quality. Out of 43 stocks in the same industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we also have ARREF’s ratings for Growth, Momentum, Stability, and Sentiment. Get all ARREF ratings here.
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FSUGY shares were trading at $29.31 per share on Wednesday afternoon, down $0.57 (-1.91%). Year-to-date, FSUGY has gained 8.73%, versus a 16.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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