With global demand for metals and minerals rising dramatically due to their essential function across multiple industries, the mining sector is well-positioned for substantial growth. Against this backdrop, quality miner stocks Glencore plc (GLNCY), Fortescue Ltd (FSUGY), and Dundee Precious Metals Inc. (DPMLF) could be solid buys now.
The mining industry is an indispensable conduit, supplying vital metals and minerals, which fuel various sectors such as construction, jewelry, medicine, technology, and the burgeoning field of renewable energy. This industry has undeniably been an engine of progress, propelling modern economies' expansion and development while bolstering employment opportunities.
The global mining market is projected to grow to $2.15 trillion by 2027, growing at a CAGR of 6.1%. Given that the world population is expected to reach 9.7 billion by 2050, the demand for the mining sector will undeniably surge.
As nations make substantial investments to achieve their net-zero climate aspirations, the demand for critical minerals like copper, lithium, cobalt, nickel, and rare earth elements required for clean energy is predicted to escalate significantly. Experts project that an accelerated transition toward global net zero by 2050 would necessitate six times more mineral inputs in 2040 than at present.
The escalating demand for metals like lithium, stimulated by the supply chain of the EV industry, has opened up a profitable avenue for the mining sector to exploit. The global demand for lithium batteries is expected to soar over five-fold by 2030. The U.S. market is estimated to proliferate over six-fold, equating to an annual budget of $55 billion by the end of this decade.
Moreover, the increasing use of automation and digitalization has allowed mining companies to stay ahead of emerging trends and maintain a competitive edge.
Considering these conducive trends, let's take a look at the fundamentals of the three miner stocks.
Glencore plc (GLNCY)
Headquartered in Baar, Switzerland, GLNCY produces, refines, processes, stores, transports, and markets metals and minerals, and energy products. It operates through two segments: Marketing Activities and Industrial Activities.
On December 1, GLNCY and Norsk Hydro ASA purchased a 30% equity stake in Alunorte S.A. and a 45% equity stake in Mineracão Rio do Norte S.A., where GLNCY became party to the Alunorte joint venture with Hydro, and to the MRN joint venture with South32 and Rio Tinto. GLNCY will have offtake rights for the life of mine in respect of its pro rata share of the production from both Alunorte and MRN.
On November 14, GLNCY entered into a binding agreement with Teck Resources Limited for the acquisition of a 77% effective interest in the entirety of Teck’s steelmaking coal business, Elk Valley Resources, for $6.93 billion in cash, on a cash-free debt-free basis, subject to a normalized level of working capital.
These world-class assets and the experienced people operating them are expected to meaningfully complement GLNCY’s existing thermal and steelmaking coal production in Australia, Colombia, and South Africa.
GLNCY’s annualized dividend rate of $1.20 per share translates to a dividend yield of 10.86% on the current share price. Its four-year average yield is 4.65%. GLNCY’s dividend payments have grown at a 21.1% CAGR over the past five years.
GLNCY’s trailing-12-month cash from operations of $13.94 billion is significantly higher than the industry average of $415.73 million. Its trailing-12-month ROCE, ROTC, and ROTA of 21.01%, 12.80%, and 8.05% are 175.9%, 130.2%, and 143.6% higher than the industry averages of 7.61%, 5.56%, and 3.31%, respectively.
In the six months that ended June 30, 2023, GLNCY’s revenue and adjusted EBIT stood at $107.42 billion and $6.31 billion, respectively. Moreover, its adjusted EBITDA stood at $9.40 billion.
For the same period, net income attributable to equity holders and earnings per share stood at $4.57 billion and $0.36, respectively.
Street expects GLNCY’s revenue and EPS for the fiscal year ending December 2023 to be $218.87 billion and $0.81, respectively.
The stock has gained 5.8% over the past month to close the last trading session at $11.05. Over the past three months, it gained 1.8%.
GLNCY’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Momentum, Stability, and Sentiment. Within the Miners - Diversified industry, it is ranked #4 out of 39 stocks.
To see additional POWR Ratings for Growth, Value, and Quality for GLNCY, click here.
Fortescue Ltd (FSUGY)
Headquartered in East Perth, Australia, FSUGY explores, develops, produces, processes, and sells iron ore in Australia, China, and internationally. The company operates through the Metals and Energy segments.
On November 17, FSUGY expanded its global manufacturing capabilities by investing $35 million to kickstart a U.S. Advanced Manufacturing Center in Michigan, USA. The facility has the potential to create up to 600 jobs in its first phase and is expected to become a major hub for FSUGY’s production of automotive and heavy industry batteries, hydrogen generators, fast chargers, and electrolyzers.
The new manufacturing center is anticipated to directly benefit from Inflation Reduction Act tax credits for Battery Modules, up to $10 per kWh.
Its annualized dividend rate of $2.56 per share translates to a dividend yield of 7.55% on the current share price. Its four-year average yield is 11.58%. FSUGY’s dividend payments have grown at a 32.4% CAGR over the past five years.
FSUGY’s trailing-12-month cash from operations of $7.43 billion is significantly higher than the industry average of $415.73 million. Its trailing-12-month net income and levered FCF margins of 28.44% and 22.46% are 377.2% and 446.8% higher than the industry averages of 5.96% and 4.11%, respectively.
In the fiscal year that ended June 30, 2023, FSUGY’s operating sales revenue and gross profit stood at $16.87 billion and $9.05 billion, respectively. Moreover, its free cash flow increased 19% year-over-year to $4.25 billion.
For the same year, underlying net profit after tax and earnings per share attributable to the ordinary equity holders of the company stood at $5.52 billion and 155.70 cents, respectively.
Street expects FSUGY’s revenue for the fiscal year ending June 2024 to increase 3% year-over-year to $17.37 billion.
The stock has gained 21.7% year-to-date to close the last trading session at $33.93. Over the past three months, it has gained 33.1%.
FSUGY’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
FSUGY has a B grade for Stability and Quality. Within the Miners - Diversified industry, it is ranked #3.
Beyond what we’ve stated above, we have also rated the stock for Growth, Value, Momentum, and Sentiment. Get all ratings of FSUGY here.
Dundee Precious Metals Inc. (DPMLF)
Headquartered in Toronto, Canada, DPMLF acquires mineral properties and explores, develops, mines, and processes precious metals. It owns and operates a gold, copper, and silver mine.
On December 11, DPMLF announced a maiden Mineral Resource Estimate (MRE) of 1.78 million ounces for its fully owned Čoka Rakita gold project in eastern Serbia, where DPMLF announced a high-grade discovery in January 2023. The Inferred MRE comprises gold within 9.79 million tonnes grading 5.67 g/t Au and assumes an underground mining scenario.
The initial MRE marks a significant milestone for DPMLF’s future growth and confirms Čoka Rakita’s potential as an attractive, high-quality gold project.
On November 7, DPLMF’s Board of Directors declared a fourth-quarter dividend of $0.04 per common share. The dividend is payable to shareholders on January 15, 2024.
Its annualized dividend rate of $0.16 per share translates to a dividend yield of 2.32% on the current share price. Its four-year average yield is 1.75%. DPMLF’s dividend payments have grown at a 38.7% CAGR over the past three years.
DPMLF’s trailing-12-month cash per share of $3.07 is 97.4% higher than the industry average of $1.56. Its trailing-12-month net income and levered FCF margins of 27.61% and 22.62% are 363.3% and 450.8% higher than the industry averages of 5.96% and 4.11%, respectively.
In the fiscal third quarter that ended September 30, 2023, DPMLF’s revenue and free cash flow increased 4.9% and 3.2% year-over-year to $135 million and $44.61 million, respectively.
For the same quarter, adjusted net earnings and adjusted earnings per share stood at $27.13 million and $0.15, up 7.3% and 15.4% from the prior-year quarter, respectively. As of September 30, 2023, DPMLF’s current assets came at $733.31 million, compared to $610.92 million as of December 31, 2022.
Street expects DPMLF’s revenue for the fiscal year ending December 2023 to increase 9.7% year-over-year to $625.26 million.
The stock has gained 10.9% over the past three months to close the last trading session at $6.91. Over the past year, it has gained 45.2%.
DPMLF’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
DPMLF has an A grade for Quality and a B for Value and Stability. It is ranked #2 out of 42 stocks within the Miners - Gold industry.
Click here for the additional POWR Ratings for DPMLF (Growth, Momentum, and Sentiment).
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GLNCY shares were unchanged in premarket trading Tuesday. Year-to-date, GLNCY has declined -9.65%, versus a 22.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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