mining stocks
Two Unconventional Precious Metals Investors Should Consider
By Sasha Cekerevac for Investment Contrarians | May 23, 2013
Many investors in the precious metals sector have been disappointed with the significant decline in prices this year. Precious metals mining stocks have fared even worse than the commodities, with massive drops in their share prices.
An area where many investors make a mistake is in portfolio diversification. I’ve mentioned this many times in the past, but it bears repeating: never place all your money in one company or asset class.
While the precious metals index has declined, not all of the components have had the same performance or even the same level of fundamental developments. While gold is down 18% this year, and silver has dropped by 26%, platinum is only down 5.3%, and palladium is up 4.7%.
As I’ve mentioned in a previous article, investors should clearly look at adding platinum and palladium to their well-diversified portfolios if they are interested in having some exposure to the precious metals sector. The reason is that demand for both platinum and palladium is set to increase from industrial use. Investors should diversify part of their portfolios away from the traditional precious metals of silver and gold and into both platinum and palladium if they still wanted exposure to this sector.
Note that I’m referring to exposure to the precious metals sector directly through the commodities themselves, not the mining stocks for platinum and palladium. This is because the vast majority of platinum mining stocks are located in South Africa, and much of the platinum supply comes from Russia. Mining stocks in these precious metals are facing increasing costs, significant labor problems including strikes, and potentially stricter regulations.
Precious metals mining … Read More
Correction in Gold Mining Sector Close to a Bottom
By Sasha Cekerevac for Investment Contrarians | Mar 15, 2013
The recent pullback in gold bullion has certainly hurt gold mining stocks. While one can develop a sound investment strategy, if the price of the stock continues moving downward, it makes it extremely difficult to step in and buy.
Gold mining stocks have seen a serious sell-off over the last few months. So what about gold mining stocks as a long-term investment strategy?
To begin with, looking at the commodity from an investment strategy point of view, gold has pulled back and has bounced off a key support level. Obviously, whatever direction the price of gold moves, the majority of gold mining stocks will move in tandem.
No one can predict the price of a commodity for certain. However, we do know that there remains strong demand for physical gold and that central banks around the world continue to have easy monetary policies.
While that is a sound investment strategy, it does not guarantee that gold will see an increase. The market could continue declining, as more sellers of paper gold emerge.
Assuming that gold prices will increase, gold mining stocks are beginning to look attractive, because they’ve declined to such a level that many are trading at a discount to book value. This means that if the company were to be bought and sold in pieces, the sum of the parts is worth more than the current stock price.
This type of investment strategy, looking for value, is one approach that an investor can take when trying to determine which gold mining stocks might be suitable for their portfolio. Momentum is not bullish for gold mining stocks at the … Read More
What Are the Two Hottest Precious Metals? Hint: Gold Isn’t One of Them
By Sasha Cekerevac for Investment Contrarians | Feb 7, 2013
Many investors in gold mining stocks have been disappointed over the past few months, as their shares have languished. Since November’s low, gold has gone down slightly, currently trading at $1,665 an ounce. Obviously, mining stocks need the commodity to increase in price for their shares to appreciate.
However, there are two precious metals that have seen a spectacular rise in prices since November: platinum and palladium.
Platinum was trading at approximately $1,545 in early November; now it’s just less than $1,700 an ounce, up 10%. Palladium has outperformed these other precious metals, as it was trading at $590.00 an ounce in early November, and it’s now at $750.00, up more than 28%!
When it comes to investing in mining stocks involved in extracting precious metals, it’s crucial to understand the underlying fundamentals of the commodity market.
Obviously, the two main determinants of price for precious metals are supply and demand. The precious metals of palladium and platinum are heavily used in the construction of catalytic converters. As many of you are aware, last year was an extremely strong year for car sales in many parts of the world. This is expected to continue through 2013.
While high-priced precious metals are causing a decline in jewelry demand, the large demand for automobile sales appears to be more than enough to compensate for any slack in the market. With interest rates so low in America, I don’t see a significant move up over the next six to 10 months, and this will continue to drive strong automobile sales in 2013.
According to automotive market research provider LMC Automotive Limited, in 2012, … Read More
This Mining Sector’s Ready for a Big Move
By Sasha Cekerevac for Investment Contrarians | Feb 4, 2013
When it comes to developing and creating a long-term investment strategy for your portfolio, one of the more difficult aspects is maintaining a focus on the horizon. What this means is that sometimes one needs to look past the short-term aberrations and focus on where the economy and stocks will be in the future.
The topic of mining stocks has come up quite often lately. Initially, when one talks about mining stocks, many people automatically gravitate toward gold and silver companies.
I would suggest that there are data showing that other commodity mining stocks might offer strong long-term potential capital appreciation.
Professionals know that the market price of a stock offers far more information than any one data point. If the price of a stock or commodity is moving, this is certainly an indication of where people are placing their funds through their own investment strategy.
While some might have an investment strategy primarily in mining stocks, I would urge diversifying away from any one commodity in this sector, creating a more diversified portfolio in general.
Getting ahead of the curve over the retail public is a difficult but attainable investment strategy. I would suggest that, in addition to looking at economic data in forming one’s own analysis, one should look to the price charts and see what’s happening on the ground.
Recently, we’ve seen a recent breakout in one commodity that might surprise a lot of people: copper.
“Doctor Copper,” as the commodity is often called due to its ability to predict economic growth, has just broken out of its downtrend. While many are focusing on the recent negative … Read More
How to Pick the Best Gold Bullion Mining Stocks
By Sasha Cekerevac for Investment Contrarians | Jan 28, 2013
Many investors in gold bullion have become increasingly worried due to the lack of price appreciation lately. Even though there has been an aggressive monetary policy initiative by the Federal Reserve, gold bullion and mining stocks in the sector have declined.
Obviously, no one can predict the future; it’s impossible to know for sure where gold bullion, or mining stocks in general, will be in the future.
However, there are several things that individual investors can do to enhance their probability of success when it comes to investing in gold bullion mining stocks.
One metric that I watch is the debt level of a company. This doesn’t mean to avoid all mining stocks with high levels of debt; rather, one should only buy these companies at a discount, unless they are growing rapidly. Gold bullion mining stocks with high levels of debt are far more likely to be susceptible to negative shocks.
Because interest rates have been low for some time, gold bullion mining stocks with high debt have been able to get away with relatively low rates of financing. But over the next five years, we are certainly looking at a higher interest rate environment; this is one area of caution for investors.
One way to look at gold bullion mining stocks is in two general categories: low- or no-debt mining stocks and high-debt mining stocks. The companies with a high debt level should not trade at a premium when compared to gold bullion mining stocks with low levels of debt, unless their growth rate is above average.
Here are three stocks that are great examples.
One of the … Read More
Why Gold’s Worth a Look on Dips
By George Leong for Investment Contrarians | Jan 10, 2013
Gold is currently in a holding pattern at below $1,700 an ounce, but one thing is for sure: in spite of what some pundits are saying, it’s not time to sell yet. In an interview on CNBC, Marc Faber, also known as “Dr. Doom,” suggested that gold could correct 10% or more to as low as $1,550 or $1,600. (Source: “‘Dr. Doom’ Faber Sees Possible 10% Gold Correction,” Yahoo! Finance via CNBC, January 8, 2012.) While I’m not as negative, I do believe gold could retest support between $1,600 and $1,625 in the near term. Failure to hold could see a sub-$1,600 price.
In my view, gold continues to be a place to park some capital, and for this reason, I feel the metal will likely continue to hold above $1,500 after 11 straight up years.
For instance, if we assume the global economy will weaken, especially in the eurozone, the impact on global gross domestic product (GDP) growth would be negative. Stock values would fall, so you would need a safe haven to park your capital, which many of you know is in gold.
There’s been plenty of talk around here regarding whether the precious metal is heading for $2,000. In my view, the current global risk will support and drive gold higher.
The chart shows sideways trading around the 50-day moving average (MA) with weakening technical indicators, based on my technical analysis. I view downside moves as an opportunity to accumulate the precious metal, given the current macro situation.
Chart courtesy of www.StockCharts.com
I continue to like gold going forward, given the massive financial distress and recession in … Read More
Why Gold Will Be the Super Commodity
By George Leong for Investment Contrarians | Dec 5, 2012
I’m tired of reading and talking about the so-called “fiscal cliff,” but it could spell dire consequences for the economy if it is allowed to go through (and even if not). The reality is that America needs to stop printing money with no regard for the massive national debt load. Allowing the debt to continue to rise will punish the country’s future generations.
If we assume that the global economy will weaken, especially in the eurozone, the impact on global gross domestic product (GDP) growth would be negative. Stock values would fall, so you would need a safe haven to park your capital, which many of you know is in gold.
There’s been plenty of talk around here regarding gold and whether the precious metal is heading for $2,000. In my view, the current global risk will support and drive gold higher.
For any gold investor, the question is whether to buy the physical bullion or gold mining stocks. For the average investor, I favor gold stocks over the higher risk of other options.
The mining sector continues to be an excellent place to make money. An investment strategy would be to buy a mixture of exploration-stage gold mining stocks along with small to large gold producers. Under this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large gold producers.
For exchange-traded fund (ETF) investors, the SPDR Gold Trust ETF (GLD) is worth a look and is currently trading in a sideways channel above the 50- and 200-day moving averages (MAs).
Chart courtesy of www.StockCharts.com
If you are looking at … Read More
How to Pick the Winning Mining Stocks to Profit From the Platinum Deficit
By Sasha Cekerevac for Investment Contrarians | Nov 19, 2012
While many people have been looking to gold over the last few years, another precious metal that may also benefit is platinum. As many people know, supply and demand are key when it comes to the pricing of any precious metals, including platinum. Mining stocks that are producing platinum in excess of demand will put downward pressure on prices. Conversely, if demand was stable for platinum and mining stocks were unable to fulfill demand, the deficit would be good news for prices.
An interesting report by Johnson Matthey stated that it’s highly likely that the platinum market will be in a deficit. Such a scenario would certainly be bullish for platinum mining stocks, which aren’t affected by any operational issues. Jonathan Butler, the author of the report, states that a significant reduction in the supply of platinum and the recycling of catalytic converters is going to move the platinum market into a deficit. (Source: “Platinum Market Forecast to be in Deficit in 2012,” Platinum Today, November 13, 2012, Johnson Matthey, last accessed November16, 2012.)
The report cites severe disruptions in South African mining as one cause, among others, of the shortfall in platinum; these disruptions will result in a 10% decline in worldwide platinum supplies while demand remains firm.
South Africa, specifically, will have a 12% decrease in platinum extracted, the lowest 11 years, according to the report.
This is one major issue that people must be aware of when investing in mining stocks. Regional disruptions due to strikes, political instability, and other operational problems are inherent in all mining stocks, not just those involved in the platinum industry.
When … Read More
Why You Need to Be Looking at Mining Stocks
By George Leong for Investment Contrarians | Oct 11, 2012
Gold and silver continue to be bullish on the charts. I can see gold breaking to $1,800 an ounce, something that nearly materialized on October 5, when cash gold traded at $1,795.78 prior to slipping. The last time gold was above $1,800 was on November 8, 2011.
Silver is holding around $34.00 an ounce; but I’m not as bullish on the white metal, because the price is largely driven by the direction of the global economy.
I continue to like gold going forward, given the financial crisis in the eurozone—and, trust me, it is not going to get better anytime soon. It could take years. Moreover, with a recession expected to hit the eurozone in 2013, the crisis could deepen further.
Across the Pacific, you have the stalling in China and its impact on the other Asian countries, like South Korea and Japan, along with the smaller emerging Asian countries.
For those of you who took my advice to hold on and accumulate gold on weakness down to $1,600, it has been a nice ride. Major price weakness should be viewed as an opportunity to accumulate.
I favor the metal plays and continue to see opportunities, especially in the mining companies and junior gold miners.
China and India continue to be the world’s top buyers of gold, and this is expected to continue. China has also been buying mining companies around the world in an effort to increase its reserves. This is a reason why I like some of the smaller mining companies, especially those with a massive reserve of proven metals in the ground, waiting to be developed and … Read More
How to Pick the Right Mining Stocks in the Current Environment
By Sasha Cekerevac for Investment Contrarians | Sep 25, 2012
It’s not news to anyone that the global economy is slowing down. With Europe experiencing a severe credit crisis and many of the member nations reporting substandard economic performance, China is also failing to re-ignite its economy. Many are hoping that the Chinese economic engine will spark the global economy, but I have serious doubts that this is possible.
Yes, the Chinese are trying their best to boost their economy through massive infrastructure spending. They know that the rest of the global economy is slowing and, thus, their exports will not grow at an above-normal rate. In fact, we know that even U.S. exports are weak, especially to Europe. One sector that has had some headwinds is that of mining stocks geared towards economically sensitive commodities like iron ore.
While many mining stocks have gone up with the recent Federal Reserve monetary policy action, in addition to the European Central Bank’s actions, the underlying commodities won’t gain traction unless the global economy picks up. Considering China is a massive buyer of numerous commodities, investors in mining stocks should pay attention to how that nation is performing.
BHP Billiton Limited (NYSE/BHP), which is one of the world’s largest mining stocks, has previously stated its intentions to delay and halt many of its new projects. This is because, at the time, it saw demand slowing due to the weak global economy. BHP has now come out with a more recent forecast, stating that iron ore demand from China has decreased by half.
As the Chief Commercial Officer, Alberto Calderon stated, “We’re already seeing the beginning of the end of the first phase … Read More
South African Gold Mining Stocks Sell Off Amid More Worker Violence
By Sasha Cekerevac for Investment Contrarians | Sep 5, 2012
Investing in gold mining stocks is risky to begin with, but labor unrest is a growing problem in certain parts of the world. With gold prices continuing their move up, mining stocks in unstable parts of the world have now additional problems of workers demanding a larger share of the profits. In particular, worker unrest appears to be spreading in South Africa, on the heels of the recent deaths of 44 people at a platinum mine owned and operated by Lonmin Plc (LSE/LMI).
The latest incident occurred with a gold mine owned and operated by Gold One International Limited (ASX/GDO). The gold mine just outside of Johannesburg erupted in violence as security forces opened fire with rubber bullets into an armed, protesting crowd.
Workers are increasingly engaging in illegal strikes, demanding better pay despite existing labor agreements. Mining stocks are getting hit, as investors are increasingly looking to sell first and ask questions later. This type of violence might only be the tipping point, and we could see more sentiment moving against mining stocks in South Africa, whether investors are involved in gold or other commodities.
With protesters attacking a bus carrying workers to the mine site, security forces fired tear gas and rubber bullets to hold off the attackers. As of last check, there have been no fatalities in this incident. The real fear among investors and executives is if gold mining stocks will be pushed out for more state-owned businesses.
A statement from the South African minister of mineral resources, Susan Shabangu, was certainly not comforting, as she called on greater scrutiny for mining stocks and reported that … Read More
A Warning for the Stock Market You Should Be Aware Of
By Sasha Cekerevac for Investment Contrarians | Aug 30, 2012
While many investors are concerned about the global economy, the stock market continues to move up. Some might be feeling left out of the party. When it comes to getting a feeling of what’s happening in the global economy, starting with the basic raw material commodity firms is a good first step. The global economy depends on mining stocks to extract valuable inputs, such as iron ore, that go into making things, such as steel. If the global economy starts to slow down, less demand for the final product means that mining stocks will receive lower prices for the extracted materials.
BHP Billiton Ltd. (NYSE/BHP), one of the world’s largest mining stocks, announced that it is not approving any new projects until June of 2013. The company went on to include a delay of its massive $20.0-billion Olympic Dam mine in Australia. With a massive decrease in income to $5.5 billion for the first six months of 2012, ended June 30, as compared to $13.1 billion in the year-earlier period, the company and other mining stocks are feeling the pinch from a slowing global economy.
With China, being a major buyer of raw materials, now slowing down rapidly, the future is not bright for mining stocks of basic commodities, at least not in the short term. The company states that costs that are continuing to rise and buyers are reducing the level of orders for iron ore, copper, coal, and nickel among other base materials.
This is on top of reports that inventory levels are soaring in China. Basically, the economy appears to be grinding to a halt. This could … Read More
Why Mining’s Still a Great Place to Make Money
By George Leong for Investment Contrarians | Aug 23, 2012
Gold has shown some good support and buying after previously declining to below $1,525 an ounce. The metal has rallied above $1,600 and is currently showing some promise, being on the verge of a possible breakout towards $1,700.
I continue to like gold going forward, given the massive financial distress and possible exit of Greece from the eurozone, despite recent statements from the European Central Bank and its desire to keep the eurozone intact. And then there is Spain and the other five eurozone countries currently in a recession.
Even if the yellow metal fails to hold at $1,600, I do not feel it is time to dump gold stocks and believe major price weakness should be viewed as an opportunity to accumulate.
I favor metal plays and continue to see opportunities, especially in the mining companies and junior gold miners. You want to ignore the daily fluctuation in gold, silver, and copper prices, understanding that these mining companies will continue to mine.
China and India continue to be the world’s top buyers of gold and this is expected to continue. China has also been buying mining companies around the world in an effort to increase its reserves. This is a reason why I like some of the smaller mining companies, especially those with a massive reserve of proven metals in the ground waiting to be developed and needing a cash-rich partner to get the ore out of the ground.
You can buy the major gold players, such as Freeport-McMoRan Copper & Gold Inc. (NYSE/FCX), Barrick Gold Corporation (NYSE/ABX), or Newmont Mining Corporation (NYSE/NEM), but for the real big gains, … Read More
Death of 44 Miners in South Africa Sends Platinum Prices Higher
By Sasha Cekerevac for Investment Contrarians | Aug 21, 2012
Like many commodities, platinum investing is based on supply and demand dynamics. While the demand portion of the equation is based primarily on world economic fundamentals, the supply side can have shocks to the system that can impact prices and affect one’s platinum investing strategy.
Last week saw massive violence break out in South Africa, at the location of the third largest platinum miner Lonmin Plc (LSE/LMI.L). A strike by miners erupted in bloodshed, with a total of 44 people killed, most of who were gunned down by police after strikers attacked the security forces with machetes. Platinum investing through mining stocks can be risky for many reasons; labor strife in unstable countries is chief among them.
There appears to be some resolution close at hand, as the company has backed off its disciplinary actions, announcing that returning workers won’t be fired. As of Monday, approximately 27% of the approximately 28,000-person workforce was back in action.
Investors interested in platinum investing should note that prices have spiked because of this violent outburst. Another important point to note is that a small concentration of mining stocks has a large impact when it comes to platinum investing. Actions or issues at these mining stocks can reverberate throughout the industry, causing ripples across the pond and hitting many firms involved in platinum investing.
South Africa extracts approximately 75% of the world’s platinum. Mining stocks in that region are susceptible to labor issues and an incident such as this current one with Lonmin’s mine has the potential to spread to neighboring operations. If that were to occur, platinum prices would continue rising substantially.
Two … Read More
Uranium Investing Offers Great Long-term Potential
By Sasha Cekerevac for Investment Contrarians | Jun 21, 2012
The growth of the world’s population will have an impact in several areas, including great energy demands. As more goods are being made, this in turn means more energy use. There are only so many ways to generate energy. Over the next several decades, the most effective method still remains nuclear power and through this uranium investing will still be relevant. The best way for the retail investor to profit from uranium investing is through mining stocks.
Energy demand continues to grow for emerging nations like China and India. This is where uranium investing comes into play. These nations need the energy and only through uranium investing can they keep up with their growing needs. Emerging markets are planning a very large build-out of nuclear plants over the next decade, from which uranium investing and mining stocks should benefit.
The Fukushima Daiichi nuclear disaster in Japan did temporarily hurt mining stocks for investors interested in uranium investing. Some short-term moves can hurt total portfolio returns if they are only temporary. For those with a bullish view on uranium investing, starting to research and having a watch list of mining stocks for future accumulation might be a good idea in this environment. One positive is that, over the past year, uranium prices have remained stable. This is quite bullish for those interested in uranium investing and mining stocks. If mining stocks can estimate a stable price for the commodity, they can better plan and allocate their capital.
Chart courtesy of www.StockCharts.com
Cameco Corporation (NYSE/CCJ) is a huge company involved in uranium investing. This chart is a one-year view of the stock. … Read More
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