Metals and minerals are vital in multiple industries, from construction and infrastructure development to technology and renewable energy. Given the industry’s growing demand and significant importance worldwide, it could be wise for investors to explore three fundamentally sound miner stocks Glencore plc (GLNCY), Fortescue Metals Group Limited (FSUGY), and Amerigo Resources Ltd. (ARREF).
In light of the conflict between Russia and Ukraine that resulted in economic sanctions imposed on several countries, a substantial increase in commodity prices and disruptions in global supply chains was observed.
Amid this backdrop, the global mining market witnessed a notable expansion, with its value increasing from $2.02 trillion in 2022 to $2.15 trillion in 2023, exhibiting a CAGR of 6.1%. Further, the market is expected to grow at a CAGR of 6.7%, achieving a value of $2.78 trillion by 2027.
Moreover, the global mining equipment market was valued at approximately $135 billion in 2022 and is projected to witness a CAGR of 5.1% from 2023 to 2030, indicating a steady expansion over the forecast period. Increased investment and governmental backing for digital mine innovation are anticipated to stimulate this demand for mining equipment.
In addition, mining companies are increasingly leveraging renewable energy sources to decrease power costs and mitigate emissions in their operations. By establishing solar or wind projects near the mining sites, companies can tap into clean energy and reduce reliance on external power sources.
Given the long-term prospects for the companies operating within the mining industry, buying the shares of GLNCY, FSUGY, and ARREF could be beneficial for investors. With that being said, let us dig deeper into the fundamentals of the aforementioned stocks in detail:
Glencore plc (GLNCY)
Headquartered in Baar, Switzerland, GLNCY is engaged in the production, refinement, processing, storage, transport, and marketing of metals, minerals, and energy products. It operates through two segments: Marketing Activities and Industrial Activities. The company produces and markets copper, cobalt, nickel, zinc, lead, chrome ore, coal, crude oil, etc.
On May 9, Glencore International AG, a wholly-owned GLNCY subsidiary and Li-Cycle Holdings Corp. (LICY), an industry leader in lithium-ion battery resource recovery and the leading lithium-ion battery recycler in North America, entered into a letter of Intent to collaborate on a project in Portovesme, Italy.
The project, known as the Portovesme Hub, aims to assess the viability and establish a facility for producing essential battery materials like nickel, cobalt, and lithium from recycled battery content.
Commenting on this, Kunal Sinha, Global Head of Recycling at GLNCY, said, “This project, combined with our existing footprint in primary supply as well as recycling of battery metals, underpins our ambition to become the circularity partner of choice for the European battery and EV industry.”
On April 27, GLNCY signed a binding agreement with Norsk Hydro ASA to acquire a 30% equity stake in Alunorte S.A. and a 45% equity stake in Mineracão Rio do Norte S.A. (MRN).
Robin Scheiner, Head of Alumina and Aluminium of GLNCY, believes these investments will enhance GLNCY's capability to supply critical materials to its customers. Alunorte and MRN are known for producing high-quality products, which will support GLNCY's marketing efforts in the Atlantic basin.
In the fiscal year that ended December 31, 2022, GLNCY’s revenue increased 25.6% year-over-year to $255.98 billion, while its adjusted EBITDA grew 59.7% from the year-ago value to $34.06 billion.
The company’s income for the year and EPS improved 279.7% and 256.8% from the prior year to $16.51 billion and $1.32, respectively. Also, its total comprehensive income rose 258.1% from the year-ago value to $15.72 billion.
Street expects GLNCY’s revenue and EPS for the fiscal year 2023 (ending December 31, 2023) to be $229.98 billion and $1.25, respectively.
Additionally, its revenue and EBITDA have grown at CAGRs of 5.9% and 46.2% over the past three years, respectively. Likewise, its EBIT has improved at a CAGR of 113.3% over the same period.
Over the past nine months, the stock has gained 11.9% to close the last trading session at $11.26.
GLNCY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating 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 Momentum and Stability. In the 43-stock Miners - Diversified industry, it is ranked #4. To see additional ratings of GLNCY for Growth, Value, Sentiment, and Quality, click here.
Fortescue Metals Group Limited (FSUGY)
Based in East Perth, Australia, FSUGY engages in the exploration, development, production, processing, and sale of iron ore worldwide. It explores copper and gold deposits and also provides port towage services.
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. Under this partnership, the two companies will collaborate on various initiatives to reduce emissions in iron production.
Commenting on this, FSUGY’s CEO Fiona Hick said, “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 established a significant partnership with the Nyamal traditional custodians by entering into an agreement to supply mining equipment for the Company's Iron Bridge Magnetite Project.
Valued at $18 million, this agreement further strengthens the existing relationship between FSUGY and Nyamal businesses, which have already been awarded contracts worth $331 million since 2019.
For the six-month period that ended December 31, 2022, FSUGY’s operating sales revenue amounted to $7.84 billion, while its gross profit came in at $3.89 billion. During the same period, its net profit after tax stood at $2.37 billion. 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 (ending June 30, 2023) to be $16.71 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 36.2% over the past nine months to close the last trading session at $29.45.
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.
It has a B grade for Value, Stability, and Quality. Within the same industry, it is ranked first. Click here to see FSUGY’s ratings for Growth, Momentum, and Sentiment.
Amerigo Resources Ltd. (ARREF)
Headquartered in Vancouver, Canada, ARREF, through its subsidiary, Minera Valle Central S.A., produces and sells copper and molybdenum concentrates from Codelco's El Teniente underground mine in Chile.
On June 20, backed by its strong financials, ARREF paid its shareholders a quarterly dividend of Cdn$0.03 ($0.02) per share. The company’s annual dividend translates to a 7.57% yield on the prevailing prices, while its four-year average dividend yield is 2.52%.
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% versus $37.82 million as of December 31, 2022.
The consensus revenue estimate of $34.92 million for the second quarter (ending 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 EBITDA have grown at CAGRs of 15.7% and 84.9%, respectively. Likewise, its levered FCF and total assets have improved at CAGRs of 18.8% and 2.7% over the same period, respectively.
ARREF’s shares have gained 71.2% over the past nine months to close the last trading session at $1.16.
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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GLNCY shares were trading at $10.93 per share on Wednesday afternoon, down $0.33 (-2.93%). Year-to-date, GLNCY has declined -15.06%, versus a 14.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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