Sector Spotlight: Mining (part 2)

I continue my look at the mining sector in a quest to find investment opportunities

Article updated: 18 December 2020 4:00pm Author: Michael Baxter

The mining sector is a significant sector, and I cannot possibly look at every company — instead, I have selected some strict criteria. Firstly, they must have a market cap over £100 million; secondly, there must be something interesting about each company I cover. My starting point is revenue or profit growth over the last five years, if that looks encouraging, I delve a little deeper, and if the company still looks interesting, I include it here.

There are some large miners not included, for example, Fresnillo. Please don’t take this as a negative sign, it may well be a good company, but profits have fallen over five years, so, by my criteria, it fails to get in my list.

I urge investors to do more research — this article is designed to pique interest; I am not recommending buying companies here. I am suggesting you carry out more research on any companies described below that you think could be interesting. 

BHP Group

It’s been a good few years for the giant mining company that produces iron ore, copper, diamonds and aluminium, oil and natural gas.  Revenue has increased by more than a third since 2016. That year the company made a $7 billion loss, in the 12 months to June 30, 2020, pre-tax profits exceeded $13.5 billion. For some of the smaller companies in this sector, revenue growth at that level is not exceptional, but for a company with a market cap of almost £100 billion, operating in as old a sector as mining, that was quite the achievement.

The balance sheet looks strong; dividends are okay. BHP has never been a great dividend payer, but then it has also offered shareholders growth — at least shares have increased by getting on for three-fold in five years. Someone who had invested in the Company in 2011, might be unhappy, since shares still languish significantly below the highs reached that year. Nevertheless, an investor who bought in at the beginning of this century would have increased the value of their holding roughly seven-fold, not bad for a company that currently pays dividends that equate to 3.44 per cent yield. 

Share price 1,991p
2020 high 1,991p
2020 low 940p
Five year high (2019) 2,020p
All time high (2010) 2,610p
Change last 12 months 11%
Change last five years 1,312%
Change since 1997 382%
Market cap £m 100,860
Yield % 3.4
P/E 16
Revenue growth since 2015 38.7%
Pre-tax profits growth since 2015 N/A
Total assets/total liabilities 2.0%
Current assets/total liabilities 0.4%
Current assets/current liabilities 1.4%
net assets £m  52,246

Bushveld Minerals 

Bushveld Minerals is a small company by the standards of the mining sector, with a market cap of £167 million, not many investors will have heard of it. Shares have fallen sharply since the 2008 peak, so why is it included here, where I am only looking at companies I deem especially interesting?

First of all, the revenue history piqued my interest — from $2.9 million in 2017 to $117 million last year.

Drill down, and you find net asset value exceeds market valuation. Usually, when you see a company that is valued by the markets at less than net assets, you can assume this is a company with low growth prospects.

The markets clearly have low expectations — the P/E ratio of Bushveld Minerals is just 3.44

But then it gets interesting — the company mines vanadium and vanadium is being hailed as a potential solution to the problem of energy storage. Vanadium-flow batteries could provide utility-scale energy storage.

As you know, as renewable energies become more critical, cracking the problem of energy storage will become one of the most important of all technology challenges, and lithium-ion batteries have shortcomings when used at the grid level. 

Whether Bushveld Minerals is a good investment opportunity is a call only you can make it, but I would recommend investing time into looking more closely at the company.

Share price 15p
2020 high 23.9p
2020 low 8.8p
Five year high (2018) 48.4p
All time high (2018) 48.4p
Change last 12 months -25%
Change last five years 697%
Change since 2012 -61%
Market cap £m 173
Yield % N/A
P/E 3.57
Revenue growth since 2017 3,934.5%
Pre-tax profits growth since 2017 From loss making to profit
Total assets/total liabilities 3.6%
Current assets/total liabilities 0.9%
Current assets/current liabilities 4.2%
net assets £m  241

Centamin 

Profits at Centamin have increased from $58 million in 2015 to $173 million last year. 

Dividend yield is 2.63 per cent, so nothing special, but then dividend payments have quadrupled in five years, so that’s not bad. Shares have doubled in five years too, so an investor who bought in 2015 would now be seeing a dividend yield of around five per cent of the original investment.

Shares peaked in August this year, which can be a good sign.

The company is into mineral exploration, development & mining and is dual-listed on the London and Toronto Stock Exchanges.

Its primary focus is gold mining in the Arabian-Nubian Shield. As you probably know, 2020 has been a good year for the gold price, which perhaps goes a long way to explaining the recent good performance.

An investment in Centamin is partly at least a bet on the gold price. 

Share price 123p
2020 high 232p
2020 low 94p
Five year high (2020) 232p
All time high (2020) 232p
Change last 12 months 4%
Change last five years 287%
Change since 2001 1,075%
Market cap £m 1,432
Yield % 2.62
P/E 21
Revenue growth since 2015 28.3%
Pre-tax profits growth since 2015 N/A
Total assets/total liabilities 17.0%
Current assets/total liabilities 5.5%
Current assets/current liabilities 6.8%
net assets £m  1,292

Caledonia Mining 

Caledonia Mining is a gold miner; it describes itself as cash generative gold producer. Its fortunes are closely tied with the gold price.

The Company focuses on the Blanket Mine in Zimbabwe, which it acquired in 2006.  

Profits have increased seven-fold since 2015, and it is this rapid growth that makes it worthy of conclusion in this spotlight.

Share price 1,230p
2020 high 1,890p
2020 low 615p
Five year high (2020) 1,890p
All time high (2020) 1,890p
Change last 12 months 101%
Change last five years 99,374%
Change since 2015 20,400%
Market cap £m 149
Yield % 1.78
P/E 4
Revenue growth since 2015 55.1%
Pre-tax profits growth since 2015 662.5
Total assets/total liabilities 7.5%
Current assets/total liabilities 1.6%
Current assets/current liabilities 3.0%
net assets £m  124

Eurasia Mining 

Shares in Eurasia Mining have increased ten-fold this year, and are up 70-fold since October last year.

I covered Eurasia Mining back on November 27 last year and shares are up 12-fold since then.

The Company specialises in platinum group metals, especially palladium in Russia, in the Ural Mountains. These metals are especially interesting because of their use in catalytic converters in cutting carbon emissions.

Share price 34p
2020 high 43p
2020 low 3.5p
Five year high (2020) 43p
All time high (1998) 45p
Change last 12 months 1,114%
Change last five years 8,858%
Change since 1996 -67%
Market cap £m 938
Yield % N/A
P/E -850
Revenue growth since 2016 -21.4%
Pre-tax profits growth since 2016 Loss making
Total assets/total liabilities 12.3%
Current assets/total liabilities 2.3%
Current assets/current liabilities 2.6%
net assets £m  5

Greatland Gold 

The Greatland gold share price has seen extraordinary growth. It is up 19-fold this year alone, and up 70-fold since the spring of 2018.

It may not come as a surprise to learn its main focus is gold. The gold price has done well, which has helped The Greatland Gold share price, but the Haverion project in the Paterson region of Western Australia has been a massive success for the Company.

A new CEO starts next year. 

The Company says that the "principal activity of Greatland Gold plc is to explore for and develop natural resources, with a focus on gold." The Company was established in London during 2005 and admitted to AIM in July 2006.

Share price 35.5p
2020 high 35.5p
2020 low 2.26p
Five year high (2020) 35.5p
All time high (2006) 2.5p
Change last 12 months 1,906%
Change last five years 4,338%
Change since 2006 -13%
Market cap £m 1,375
Yield % N/A
P/E -253
Pre-tax profits growth since 2016 From loss making to profit
Total assets/total liabilities 6.6%
Current assets/total liabilities 4.7%
Current assets/current liabilities 6.6%
net assets £m  7

Glencore 

It has been a somewhat tricky few years for Glencore, and while revenue has grown at quite a canter over the last five years, the chart plotting profit growth looks like a roller coaster ride.

It made an $8billion plus loss in 2015, a $4.7 billion profit in 2018 and last year made a loss of $888 million.

But then Glencore has been making changes — slowly reducing its reliance on coal, for example. Today, it is the biggest miner of Cobalt in the world. Cobalt is a component in lithium-ion batteries, although Tesla is trying to move away from Cobalt in its batteries.

Share price 242p
2020 high 242p
2020 low 112p
Five year high (2018) 407p
All time high (2011) 524p
Change last 12 months 3%
Change last five years 199%
Change since 2011 -79%
Market cap £m 32,251
Yield % 3.35
P/E -106
Revenue growth since 2016 46.3%
Pre-tax profits growth since 2016 Loss making
Total assets/total liabilities 1.5%
Current assets/total liabilities 0.5%
Current assets/current liabilities 1.1%
net assets £m  39,236

All prices are approximate figures taken from 18 December 2020.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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