Is Polymetal a bargain compared to its competitors or are there better options out there? Let’s explore.

Will FTSE 100 mining stocks go higher?

Three Footsie mining stocks on my watchlist have made flying starts to 2022.

The Anglo American (LSE: AAL) share price climbed 34% following a $12bn increase in operating profit and a $1.7bn net debt reduction. Over a third of the miner’s 2021 EBITDA came from platinum group metals. Looking ahead, the company should prove resilient to geopolitical uncertainty. Anglo American, which is up 33% in a year, operates on six continents and has no Russian presence, unlike Polymetal.

Antofagasta (LSE: ANTO) is also racing ahead of the Polymetal share price, rising 22% this year (but down 10% over 12 months). As copper mining is the lifeblood of this Chilean multi-national’s business, shareholders will be encouraged by Goldman Sachs‘ 12-month copper price target of $13,000 per tonne. Antofagasta can build on a robust financial position after earnings per share rocketed by $87.80 last year.

Rio Tinto (LSE: RIO) stock completes the trio — it’s up 25% in 2022, but only up 4% in a year. Iron ore production accounts for almost 78% of its underlying earnings. In 2021, Rio Tinto generated +60% net cash and ordinary dividends per share rose 71%. Moreover, China’s iron ore imports remain stable in 2022, despite its economic slowdown. This is good news for the Rio Tinto share price.

With global interest rates rising, metal prices and mining stocks may fall so all of these shares come with risks. However, I believe the metals bull market could just be beginning as production seems unlikely to meet demand. For me, the outlook remains positive while supply side issues persist.

Will the Polymetal share price go lower?

Polymetal’s focus is precious metals, particularly gold and silver. It has operations in Russia and Kazakhstan. Although it consistently increased production over five years, the share price has been hurt by liquidity troubles caused by sanctions on Russian banks.

In further worrying signs, Polymetal postponed its decision on its 2021 final dividend payment. And Deloitte recently resigned as its auditor, threatening its London Stock Exchange listing.

Arguably, the stock’s substantial decline and a dirt cheap price-to-cash-flow ratio of 1.4 mean the risks it faces are priced in. Nascent plans to separate its Kazakh assets from the rest of the business lifted the Polymetal share price somewhat in recent days.

Nonetheless, I’m pessimistic about Polymetal shares. Headquartered in Cyprus, it avoided direct sanctions like those levied on Roman Abramovich’s Evraz. In a rapidly evolving situation, this could change.

The mining shares I’d buy now

Exposure to metals plays an important role in my diversified portfolio. I’m impressed by all three FTSE 100 stocks on my watchlist. They have strong balance sheets and are collectively spread across different geographies and commodities. I’d divide any spare cash between them.

By contrast, I see potential for further declines in the Polymetal share price. It’s simply too risky for me to buy at present, so I’m looking elsewhere for a solid gold miner.

The post Will FTSE 100 miners outshine the Polymetal share price in 2022? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Charlie Carman has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As a committed Fool, I reckon passive income is best achieved via the stock market. The task dividend hunters face, of course, is identifying which stocks to buy.

For my part, I feel that smaller companies are often unfairly ignored in favour of established FTSE 100 plodders. Accordingly, here are two examples of the former I might consider.

Passive income provider

Miner Central Asia Metals (LSE: CAML) is first up. The diversified base metals producer operates a copper facility in central Kazakhstan. It also owns the Sasa zinc and lead mine in North Macedonia.

For those who believe that demand for metals (and particularly copper) is only going to rise in the years ahead, CAML’s outlook could be very positive indeed. This could/should lead to improving free cash flow and, as a consequence, steadily rising dividends for passive income seekers.

Central is currently predicted to return 14p per share this year. That’s a chunky yield of 5.7%. For perspective, the best Cash ISA pays out a ludicrously low 0.65%. What’s more, this handout looks likely to be covered over twice by profit, making it, in theory at least, very secure.

The investment case is further boosted when considering the valuation. A P/E of just under 8 looks seriously cheap, given CAML’s relatively low net debt and consistent operating margins of over 40%. 

Cheap market leader

Another small-cap option that’s grabbing my attention is collagen product manufacturer Devro (LSE: DVO).

Put simply, the £350m-cap provides the casing used in the production of sausages. That clearly doesn’t grab the attention in the same way as a glitzy tech stock. Then again, I’d probably prefer to own a global leader in a niche market rather than an unprofitable business in a highly competitive space.

Despite rising 33% in value over the last year, DVO shares trade on a little less than 13 times earnings. That looks good value to me. Returns on capital and operating margins have been improving in recent years. Debt has also been coming down.

As far as passive income is concerned, analysts have the company returning 9.27p per share for the current financial year. That’s a tasty yield of 4.4% at DVO’s current share price. Importantly, this payout is expected to be covered 1.8 times by profit. Like at CAML, that suggests dividends will actually be paid. To me, that’s far more preferable to firms promising too much and not delivering.

Never risk-free

Sure, no dividend stream is guaranteed. In fact, it can be one of the first things to be sacrificed when the going gets tough. It’s also worth highlighting other, more specific, drawbacks to investing here.

As far as CAML is concerned, the company clearly has no control over a volatile copper price. Moreover, mining is a notoriously tough sector, both in a physical and financial sense. The possibility of operations being interrupted by rising Covid-19 cases can’t be dismissed either.

Pandemic aside, DVO arguably doesn’t share these risks. However, it’s worth noting that the company hasn’t hiked its dividend by much over the years. Ideally, I’d want a payout to be increasing in order to outpace inflation. It’s not a killer blow, but it’s something to consider.

So, while I do rate both stocks as being cheap sources of passive income, the importance of staying suitably diversified shouldn’t be overlooked.

The post 2 bargain small-cap dividend stocks I’d buy for a passive income appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Earnings rebound

Earlier this week, Shell revealed a strong set of results. A sizeable recovery in earnings over Q2 was recorded, prompting free cash flow to soar. As one might expect, the BP share price rose by association. I wonder if there could be more to come in the next few days. The FTSE 100 titan is scheduled to provide an update on its second quarter on 3 August.

This is not to say that BP is a one-way bet. A rising oil price is beneficial, but last year showed how volatile a commodity like black gold can be. On a longer timeline, it seems inevitable that demand will drop as the cost of buying electric vehicles falls. BP’s need to adapt won’t come cheap either. This might help explain why the shares are still far below pre-pandemic levels.

On the other hand, one might say that a P/E of just 8 suggests these potential headwinds are already priced in, especially if the company ends up beating analyst expectations next week. Even if it doesn’t, I suspect income investors won’t lose sleep. BP currently yields a forecast 5.1%. 

Hot market

York-based housebuilder Persimmon (LSE: PSN) also reports to the market next month. While we don’t know for sure what its half-year numbers on 18 August will be, we do know that UK property has been white-hot of late as more people show a desire to continue working from home.

I think the near-term performance of PSN will depend greatly on CEO Dean Finch’s commentary. Any suggestion that the withdrawal of stamp duty relief will impact trading at Persimmon could knock the share price.

Then again, it’s not as if Persimmon’s valuation looks stretched. As I type, the shares trade on a forecast P/E of 11. That still looks pretty cheap considering just how highly the company scores on quality-focused metrics. A temporary loss of momentum probably won’t bother dividend hunters either. Based on analyst projections, Persimmon offers a tempting 8% dividend yield. That’s among the biggest that one can find on the FTSE 100. 

Supercycle beneficiary

A final FTSE 100 stock I’ll be following in August is copper miner Antofagasta (LSE: ANTO). 

I’m not alone in being bullish on this company. Earlier this week, broker Peel Hunt upgraded the company based on its belief that supply of the red metal will remain restricted in 2022. This should keep copper prices high, boosting profits at ANTO. Looking further ahead, a mooted commodity ‘super cycle’ brought about by the green revolution could bring forth a raft of new investors.

To be clear, this is still risky stuff. Demand for metals such as copper is often correlated to perceptions of global economic health — clearly beyond ANTO’s control. As this month’s update showed, production is also variable and can be affected by weather as much as well as grades and recovery rates. This may help explain why shares have lost momentum over recent months.

All that said, a P/E of 15 looks reasonable to me considering how financially sound ANTO appears to be. 

Interim numbers are due on 19 August.

The post BP isn’t the only FTSE 100 stock I’ll be watching in August appeared first on The Twelfth Magpie.

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• Down 63% and yielding 6.3%! Is this FTSE 100 share a brilliant bargain?
• This 5.5%-yielding income stock’s at a 13-year low and cheap to-boot! Time to consider buying?
• Just how bad could it get for the BP share price?
• Down 65% but yielding 6%! Is this FTSE 100 dividend stock an unmissable bargain?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

What is the BlackRock World Mining Trust?

As the name suggests, this fund is dedicated to owning companies that explore, extract and sell key metals and minerals needed across the globe. 

Unsurprisingly, the portfolio’s major holdings are some of the biggest miners going. Brazilian giant Vale features heavily, as do FTSE 100-listed firms, BHP Group, Anglo American and Rio Tinto. While 40% of assets are invested in mining firms that source a number of metals, 20% of the fund is invested in copper plays. Almost the same amount is devoted to gold miners.

Naturally, an actively-managed investment trust means fees. Based on its most recent fact sheet, BRWM charges 0.9% a year to manage holders’ money. 

Why is it getting popular?

I think there are two reasons why this investment trust is in demand. First, there are fears over inflation and demand for safe-havens. Mining companies are one example of the latter.

The thinking behind this is that prices tend to rise when economies are flying. Since more things are being made, it makes sense to back those companies who provide the materials needed to make them.

The second reason why the Blackrock World Mining Trust might be proving popular is the excitement surrounding renewable energy sources and electric vehicles. The fact that these featured heavily in the $2trn spending plan announced by US President Joe Biden back in March shows how hot these themes will be going forward. It’s clear that vast amounts of metal will now be needed to bring everything to fruition.  

Both of the above should prove to be tailwinds for miners. A rise in demand should lead to higher earnings. Higher earnings should boost share prices and investor returns. A boost to investor returns should, rather neatly, provide some protection from the aforementioned inflation. 

I’d also expect more dividends for shareholders. As things stand, this investment trust offers a yield of 3.2%. That’s lower than you could get from buying some of the individual miners from the FTSE 100. However, payouts will arguably be obtained at a lower level of risk. 

Should I buy?

Based on future prospects, I find the case for investing in BlackRock pretty compelling. Even so, it pays to consider the flip side. 

If concerns over inflation subside, those already holding could flee the investment trust and recycle their profits into growth stocks again. Even if this doesn’t happen, there will always be some who want to bank gains. It’s also worth remembering that commodity investing can be an ‘interesting’ ride, even when times are good. 

Personally, I’m fine with above-average volatility, so long as I know I can stay on board for the long term. And, even if (when) the investment trust does temporarily dip in value, that dividend stream should compensate. If I’d held the shares, I’d simply receive, reinvest and repeat. Yes, the ongoing charge is on the high side, but the diversification aspect makes me think BRWM is worth the cost.

With a potential commodity supercycle on the way, I’m sorely tempted to begin building a position in this investment trust in haste.

The post This investment trust is soaring in value. Should I buy in June? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So far this year, the price of copper has risen by 30% and it’s now at a 10-year high. This is being fuelled by shortages due to growing demand and under-investment in developing the supply.

That isn’t all, there are expectations that demand for the metal is set to continue rising in the short term as economies open up post-pandemic. With copper being a key component in electric motors and batteries, there’s potential for this to be a long-term trend as the adoption of electric cars expands. This has some analysts predicting the price could double in the next three years.

All of these factors mean that I’m looking to potentially piggyback on the coat-tails of copper’s rise over the coming years. And I think Anglo American shares could be a strategic long-term way to achieve this.

Anglo American’s copper position

The good news here is that Anglo American just revealed in its Q1 financials that its copper production jumped 9% year-on-year. The company has also been investing in its Quellaveco mine in Peru. This is a large-scale copper mining project that’s expected to begin production next year.

It’s not all positive for the company’s mines, however, with a severe drought in Chile impacting production at its Los Bronces site. This could be a longer-term challenge for Anglo American, not least because it has resulted in clashes between the local community and the company over the use of water.

Commodities boom

Wider than copper, Anglo American is also well-positioned in platinum, iron ore, and diamonds, among other commodities.

I think this is positive for potential holders of Anglo American shares. That’s because the prices of such commodities are broadly rising. From the commodities noted, platinum also experiencing a huge increase in price in recent years. That said, on the diamond front, the company saw production fall by 7% year-on-year.

Yet with commodities, there are risks to bear in mind linked to their cyclicality. This means prices can rise higher for periods of time, over a period of years. But this can be followed by a subsequent drop with prices remaining low for years at a time. It makes ownership of shares in related companies potentially riskier than in some other industries.

Coal demerger

On the plus side, today the company announced at a shareholder meeting that its coal demerger had been passed. This should allow it to move away from this heavily polluting commodity and focus more on copper demand. The development could see Anglo American shares rise more closely in relation to potential copper price increases. However, this also means that the business loses some of its diversity.

And a cause of uncertainty is that CEO Mark Cutifani will step down once the Quellaveco mine is completed.

So to repeat my original question: should I buy? At present, I’ll wait to see how the market reacts to the demerger news over the coming weeks and look to buy Anglo American shares should the price dip from its current high mark.

The post Anglo American shares: should I buy as copper prices rise? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Ben Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The rising Jubilee Metals (JLP) share price

Jubilee Metals is a mining exploration company operating within Zambia. The firm used to primarily focus on finding and extracting platinum. But, more recently, its diversified portfolio now includes chrome, copper, and cobalt too.

The rising value of these metals throughout 2020 undoubtedly helped push the JLP share price higher. However, a lot of the growth appears to stem from the anticipation surrounding Project Roan.

After securing the rights to approximately 150m tonnes of copper-rich surface tailings in June last year, Project Roan was announced. The goal is to establish a facility to process and produce more than 25,000 tonnes of copper per year by 2025. Based on today’s market value of copper, that’s worth around $250m. That’s more than five times the revenue generated in 2020 alone.

Needless to say, this is a massive opportunity for the business. And, so far, everything appears to be going according to plan. The first of three construction phases has already been completed, with phase two and three scheduled for completion in Q3 2021 and Q1 2022 respectively.

Meanwhile, its platinum and chrome operations continue to flourish, with both seeing production volumes in the second half of 2020 increasing 34% and 72% respectively.

Seeing the JLP share price explode on this impressive performance isn’t at all surprising. And if it can continue delivering results, I believe the stock can climb even higher.

The risks that lie ahead

As exciting as these developments are, the mining industry is still fraught with risk, especially for smaller operators like Jubilee. One major disadvantage is their lack of pricing power. After all, the value of the metals dug up is driven by market demand, which can be highly cyclical.

This is why metal commodity prices have a habit of fluctuating. Due to lockdowns around the world, many mining sites remain unoperational, or are working at reduced capacity. This lack of supply has ultimately raised the value of metals like copper to their highest point in nearly 10 years.

Obviously, rising commodity prices hugely benefit the JLP share price. However, if the supply becomes over-saturated, these prices can crash just as fast as they went up.

The bottom line

It’s going to be a good number of years before Project Roan reaches its target production levels. And during that time, the value of copper could decline significantly.

But Jubilee already has established facilities processing other precious metals that continues to provide substantial growth. What’s more, even if Project Roan has inflated the JLP share price, the stock is still trading at a reasonable P/E ratio of around 11.6.

So, to me, this looks like it could be a relatively cheap high-growth opportunity for my portfolio, especially since the world is transitioning to renewable technology that requires a lot of the materials Jubilee is digging up.

The post Can the Jubilee Metals (JLP) share price climb even higher? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Zaven Boyrazian does not own shares in Jubilee Metals. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A rising RMM share price

Rambler is a copper and gold producer that operates within the Baie Verte Peninsula in Canada. In recent years the company has been struggling. And once Covid-19 hit, it actually came close to insolvency. But based on the latest set of published results, it seems that this risk has receded for now.

The management team successfully completed the sale of its gold circuit as well as other exploration properties and royalties to Maritime Resources for US$2m (all monetary figures are in US dollars). In addition, it was able to perform a major financial restructuring through an oversubscribed share placement that raised a further $10.5m.

Using these funds, the firm negotiated new financing agreements and satisfied existing creditors that brought the overall level of debt back under control. After all this, total debt was reduced from $13.8m in 2019 to $3.5m at the end of 2020. Similarly, the cash on the balance sheet rose from $1.9m to $6.2m.

And so, with a much stronger financial position, the business not only survived the impact of the pandemic but also came out stronger, in my opinion. Therefore the recent surge in the RMM share price doesn’t surprise me.

What’s next for the business?

With the looming threat of bankruptcy no longer a primary concern, all focus is being placed on restoring production volumes to pre-pandemic levels. Ming Mine is the firm’s primary asset and its production levels dropped considerably last year.

The management team has begun restoring Ming to its full capacity of 1,350 tonnes per day. This process is expected to be completed by December this year at the latest. What’s more, the company is also investing in expanding this production capability to 2,000 tonnes per day by 2022. And at the same time, it’s establishing an ore sorting facility at the Ming Mine site to improve operational efficiency.

Needless to say, this sounds very promising. But it’s worth remembering that any delays or further disruptions to its operations could cause significant volatility for the RMM share price. Also, because this is a mining business, it is very susceptible to fluctuating commodity prices. Copper is in high demand at the moment, which has increased its value. But as more mines become operational and the metals shortage nears an end, these increased prices may not last. This could have a negative impact on Rambler’s operating profits.

The bottom line

I believe the worst has passed for Rambler. The business appears to be back on track, and if it can increase its production volumes to the forecast level, I think the RMM share price can continue to rise.

Having said that, like many small-cap mining companies, it still carries a considerable level of risk. Personally, I’m going to wait and see how it progresses in restoring Ming’s production volumes before adding any shares to my portfolio.

The post Why is the Rambler Metals & Mining (RMM) share price surging? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Zaven Boyrazian does not own shares in Rambler Metals & Mining. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

What caused this impressive growth? And should I be adding this company to my portfolio?

The rising Anglo American share price

With many mining sites being temporarily shut down in the early days of the pandemic, a subsequent shortage of metals began. This is what appears to have triggered the start of the rising commodity prices. As manufacturing businesses slowly reopened their factories, demand built up. However, it quickly started accelerating as many countries worldwide initiated new infrastructure projects, especially within the energy sector.

The limited supply combined with the rising demand naturally led to resource prices going up. This is fantastic news for Anglo American, which is a leading producer of copper, iron and platinum. And so it was able to achieve some pretty impressive results, in my opinion. And that was despite the fact the firm suffered a severe plant outage in its platinum production division.

Looking at the full-year results for 2020, total revenue increased by $1bn, and underlying profits remained relatively flat. These are hardly groundbreaking results. But considering the reduced mining and production volumes, they’re not bad. At least, I think so. Since then, the business has begun executing plans to demerge from its South African coal operations and acquired Sirius Minerals to further diversify its portfolio.

With operations now returning to pre-pandemic levels and metal demand on the rise, I believe the Anglo American and its share price can continue to thrive over the long term. And it seems the management team agrees as they recently increased the shareholder dividends.

Risks to consider

Rising commodity prices have undoubtedly been beneficial to the Anglo American share price. However, the value of metals can be volatile, as shown by the firm’s fluctuating level of profitability. Currently, the demand for metals like Iron and copper far exceeds the available supply. But this will not always be the case. With more mining companies returning to full operational capacity and additional mining sites being established, the market may eventually become saturated.

As a consequence, metal prices could very quickly start falling again. And since the costs of mining remain relatively fixed, the level of Anglo American’s profitability could be significantly impacted.

The bottom line

With the world shifting towards electric vehicles and renewable energy, I believe the need for metals like platinum and copper isn’t going to disappear any time soon. Combining this with Anglo American’s diverse portfolio of materials makes me think the share price can continue to climb higher.

Therefore, while there are some substantial risks, I would consider adding the business to my portfolio.

The post Will the Anglo American share price keep rising in 2021? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Zaven Boyrazian does not own shares in Anglo American. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But can it climb higher? And should I be adding this business to my portfolio?

The rising Glencore share price

The mining industry was heavily impacted by Covid-19. National lockdowns led to many mining sites being temporarily shut down. And even today, there remains plenty that has yet to return to full operating capacity.

However, this lack of supply created a shortage in several commodities that has sent the prices of metals like copper and nickel surging. And Glencore is a leading provider of these, as well as many other metals.

Looking at the most recent report, the effects of Covid-19 are pretty clear. Top-line revenue fell by 34% as a result of reduced mining volumes. However, due to the previously mentioned rising commodity prices, underlying profits remained flat.

With mining volumes back on the rise and demand for precious metals still going up, Glencore and its share price look to me like they can continue growing in 2021 and beyond. The management team appears to think that, given the recent return of shareholder dividends.

Some risks to consider

Building and operating a mining site is an expensive endeavour with little room for cost-cutting. So the profitability of Glencore, as with other mining businesses, is ultimately determined by fluctuating commodity prices. This lack of pricing power adds considerable risk.

The recent increase in demand has been beneficial. However, if it falls or the supply becomes saturated, prices will once again drop, taking Glencore with it. This is actually why the company’s net income has never been particularly stable in comparison to its revenue.

Beyond this financial risk, the business also has to comply with regulations surrounding mining activity. These rules are put in place to protect the safety of workers as well as the environment. But, Glencore is an international business. It has to comply with different regulations across multiple countries. While I think it’s unlikely, suppose the firm were to breach any of these rules. In that case, it’s likely to suffer severe legal penalties and potentially lose the right to bid on new locations within the region.

The bottom line

Over the past couple of decades, Glencore has become one of the biggest resource businesses in the world. And it spent that time building up a diverse portfolio of assets.

With the world shifting towards green energy technology, I believe that the rising demand for precious metals won’t be slowing down in the near future. Combining this with Glencore’s proven business model makes me think that the share price can continue to rise. And therefore, I would consider adding it to my portfolio.

The post Can the Glencore share price keep climbing? appeared first on The Twelfth Magpie.

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• Down 10% to below £6 now! Here’s why Glencore’s share price looks a bargain to me anywhere under £12.13
• Warren Buffett warns on valuations — is market cap-to-GDP flashing a bubble signal again?
• 2 FTSE 100 dividend stocks that stand out for shareholder returns
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Zaven Boyrazian does not own shares in Glencore. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A hidden mountain of wealth

As previously stated, SolGold is a young mining business that’s still firmly within its exploratory phase. It operates primarily within Ecuador at the Andean copper belt. But it also has operations in Australia and the Solomon Islands.

What makes the company quite unique is its Alpala project. Despite its youth, it’s secured the rights to a site that sits directly on top of a vast copper, silver and gold deposit. The management team has already proclaimed it to be among the world’s best-underdeveloped locations, with an estimated mining lifetime of 55 years. And based on the preliminary results, I’d certainly agree.

The multi-billion-dollar project is estimated to contain up to 9.9 Mt of copper, 21.7 Moz of gold and 92.2 Moz of silver. Needless to say, that’s a mountain of wealth to be extracted. So, given the enormous opportunity this project presents, why is the SOLG share price behaving like it’s on a rollercoaster?

SolGold’s volatile share price

It seems there remains quite a bit of uncertainty surrounding the Alpala project. There have been consistent delays in the completion and publication of the company’s pre-feasibility study. Consequently, it’s unlikely SolGold will be able to take advantage of current high commodity prices.

However, the business of metals exploration is fraught with risk. And while delays are frustrating, the additional due diligence of the management team does seem a prudent decision, in my opinion.

But delays raise costs. So far, the Alpala project’s expenses are estimated to be between $2.4bn and $2.8bn. This is particularly troublesome as SolGold currently has no revenue stream. That means the company is entirely dependent on external funding, which created some problems for Cornerstone Capital Resources.

The Canadian firm owns a 15% stake in the Alpala project as well as an 8% interest in SolGold itself. And unfortunately, the two firms have a conflict of interest. The first wants to sell the project, while the second intends to develop it. The situation only got worse after a failed hostile takeover, adding even more uncertainty to the SOLG share price.

The bottom line

There’s no denying the Alpala project is an enormous opportunity for this business. And if executed correctly, I believe the SOLG share price could explode in the next few years. However, early-stage mining companies are already exceptionally risky. And seeing stakeholders in the project have significantly different strategies on how to proceed raises some alarm bells.

As big as this opportunity may be, the level of uncertainty and discord gives me pause. Therefore, I’ll be keeping SolGold on my watch list for now. At least until more information becomes available.

The post Is the Solgold share price about to explode? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in SolGold. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.