PICK - 3 Mining Stocks to Buy to Unearth Precious Profits

2024-05-31 06:21:00 ET

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Investors are increasingly looking for robust mining stocks to buy as we approach the second half of 2024. The recovery of the global economy has fueled demand for various metals, from precious metals like gold and silver to base metals like copper and nickel. This surge in demand and supply constraints has pushed prices higher, benefiting mining companies across the board.

Meanwhile, the ongoing transition to clean energy has become a key tailwind in mining. Analysts point out how it has driven long-term demand for metals like copper, lithium and rare earth elements. They are essential components in data centers, electric vehicles (EVs), and solar panels. Recent research suggests that the global mining market is expected to grow at a compound annual growth rate (CAGR) of 5.5% through 2028. This increase will be driven by further infrastructure development, rising construction activities, and the growing use of autonomous equipment.

With that information, let’s dive in and explore three compelling mining stocks to buy now that could generate lucrative returns in the second half of 2024.

Cameco (CCJ)

We start discussing mining stocks to buy with the world’s largest publicly traded uranium producer. Regarded as a pure-play investment in nuclear energy, Cameco (NYSE: CCJ ) focuses on mining uranium for nuclear reactors. The company owns the largest high-grade uranium reserves and low-cost operations worldwide.

In its first quarter fiscal 2024 earnings results, Cameco’s revenue declined 8% year-over-year (YOY) to C$634 million. The fall was due to the pricing of Cameco’s long-term uranium contracts, which led to uneven revenue recognition across quarters. Meanwhile, adjusted earnings per share ( EPS ) declined to C$0.13, down from 27 in the prior-year quarter.

Geopolitical factors and green energy initiatives continue to support strong pricing in uranium. As a leading Western uranium miner, Cameco plays a key role in supplying the U.S. nuclear energy sector, recently highlighted by the ban on Russian-enriched uranium imports. Support for nuclear power is also picking up across governments as a way to achieve emissions reduction pledges. Elsewhere, artificial intelligence ( AI ) is also driving gains in nuclear stocks due to projections for increased electricity demands associated with the technology. Uranium’s high energy density and low carbon emissions make it a prime candidate for powering the energy transition, including data centers and EVs.

Year-to-date, CCJ stock has returned over 25%. As a result, shares are trading at a premium valuation of 46.8 times forward earnings and 12.3 times trailing sales. Wall Street remains bullish on Cameco stock with a 12-month price target that suggests a potential upside of 3% from current levels. Interested readers may watch the $52 level as a better entry point into CCJ shares.

iShares MSCI Global Metals & Mining Producers ETF (PICK)

Next on our list of mining stocks to buy is the iShares MSCI Global Metals & Mining Producers ETF (NYSEARCA: PICK ). This fund provides exposure to a broad range of companies involved in extracting and producing metals and minerals, including precious metals, base metals and rare earth elements.

We like the diversification this fund offers and its exposure to base metals. The ongoing transition to a low-carbon economy drives robust demand for metals like copper, lithium and rare earth elements. They are essential components in EVs, data centers and renewable energy infrastructure.

PICK currently has over 26 holdings and around $1.32 billion in assets. We should also note that the fund started trading in January 2012. In terms of sectors, diversified metals and mining have the highest allocation (47%), followed by steel (35%) and copper (12%). As a top-heavy fund, the leading 10 names account for around half of the assets in PICK. BHP (NYSE: BHP ), Rio Tinto (NYSE: RIO ), Freeport-McMoRan (NYSE: FCX ) and Glencore (NYSE: GLEN ) lead the mining stocks in the fund.

So far in the year, the fund is up just 1.5%. The trailing price-to-earnings (P/E) and price-to-book (P/B) ratios are 13.7x and 1.7x, respectively. We believe interested readers may find value in PICK around these levels.

Kinross Gold (KGC)

We conclude our discussion of mining stocks to buy with the gold mining company Kinross Gold (NYSE: KGC ). It has a diverse portfolio of mines and projects across the Americas and West Africa, including the Mauritanian Tasiast and the Brazilian Paracatu mines.

Investors were pleased that Kinross Gold reported impressive first quarter fiscal 2024 results, driven by strong performance at its Tasiast and La Coipa mines. Revenue increased 16% YOY to $1.08 billion, fueled by higher volume and soaring gold prices. Adjusted EPS surged 43% YOY to $0.10, while free cash flow more than tripled to $145 million.

With its strong balance sheet and low-cost production, Kinross will likely benefit from investors’ interest in gold due to growing geopolitical tensions. In the first quarter, both margins and production levels increased substantially. Since January, KGC stock has gained 33%. Yet Kinross remains fairly valued at 16.8 times forward earnings and 2.3 times trailing sales. Finally, the 12-month price target for KGC stock suggests an 8% upside potential from current levels.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

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