Sector Spotlight: Mining

In this week’s sector spotlight, I begin a look at the mining sector, are there any good investment opportunities in mining?

Article updated: 11 December 2020 1:00pm Author: Michael Baxter

The mining sector is a significant contributor to the London Stock Exchange, and it has many constituent companies — far too many for me to cover them all here.

This feature will be over two or three parts, but even then, I can only cover a small chunk of the businesses.

I focus here on companies with a market cap over £100 million and that also seem especially interesting. By that I mean maybe they have seen rapid growth, are big dividend payers, seem undervalued by the markets or are into a growth area, such as Lithium.

Anglo American 

Anglo American’s main stock listing is on the London Stock Exchange, but it has a secondary listing on the Johannesburg Stock Exchange. It is the world’s largest producer of platinum, but also produces gold.

Anglo American is a South Africa focused miner which produces diamonds, coal, base and ferrous metals, industrial minerals, timber and coal.

According to an entry on Wikipedia, it is responsible for 0.59 per cent of global industrial greenhouse emissions, but has a target to be carbon neutral by 2040.

At the time of writing, shares stand at an eight-year high. Five years ago, the company made a heavy loss, which in turn had a knock-on effect on dividends. That year aside, Anglo American has traditionally been a strong dividend payer, although the combination of a good share price performance and a cut in dividends resulting from a performance impairing effect of Covid-19 has meant that the dividend yield is currently lower than average for the company. 

Share price 2,484p
2020 high 2,561p
2020 low 1,095p
Five year high (2020) 2,561p
All time high (2008) 3,419p
Change last 12 months 19%
Change last five years 751%
Change since 1999 1,161%
Market cap £m 33,867
Yield % 3.59
P/E 12
Revenue growth since 2015 From loss making to profit
Pre-tax profits growth since 2015 5.0%
Total assets/total liabilities 2.3%
Current assets/total liabilities 0.6%
Current assets/current liabilities 1.9%
net assets £m  31,385.0

Anglo Asian Mining

By the standards of this sector, Anglo Asian Mining has a modest market cap of £149 million, but despite its modest size (for a miner), I have included it here because of the spectacular share price performance over the last five years. Shares have increased 30-fold since 2015.

The company mines copper and gold in Azerbaijan — and has benefited from recent rises in the gold price. To an extent, its future performance will be gold price related.  

In 2015, the company made a pre-tax loss of  $8.9 million. In 2019, it made a $30 million profit. This write-up provides good detail on the company.

Share price 126.5p
2020 high 174p
2020 low 77p
Five year high (2020) 174p
All time high (2020) 174p
Change last 12 months -11%
Change last five years 3,063%
Change since 2005 44%
Market cap £m 145
Yield % 5
P/E 10
Revenue growth since 2015 Loss making
Pre-tax profits growth since 2015 Loss making
Total assets/total liabilities 2.1%
Current assets/total liabilities 0.2%
Current assets/current liabilities 0.5%
net assets £m  94.0

Antofagasta 

Antofagasta is a Chilean based miner of copper. Shares currently sit at a ten-year high, and indeed have trebled over the last five years. Profits have grown at a nice pace too.

Recently, the company announced plans to commit to responsible mining.

To an extent at least, the company’s longer-term prospects are dependent on something it has little control of, namely the copper price. Copper is currently at an eight-year high, and China account for half of global demand for copper.

Share price 1,443p
2020 high 1,443p
2020 low 612p
Five year high (2020) 1,443p
All time high (2010) 1,612p
Change last 12 months 58%
Change last five years 236%
Change since 1998 13,018%
Market cap £m 14,231
Yield % 1
P/E 37
Revenue growth since 2015 53.9%
Pre-tax profits growth since 2015 455.1%
Total assets/total liabilities 2.8%
Current assets/total liabilities 0.7%
Current assets/current liabilities 2.3%
net assets £m  9,401.0

Anglo Pacific 

Do Anglo Pacific shares represent an opportunity for income investors? I say this because the company ticks most of the boxes — decent profit growth, very appealing dividend yield, and yet the share price has not kept pace with profit growth — helping create this apparently high yield. Sure, it has taken a Covid related knock and projected profit for this year is down significantly — more than reversing growth seen over the last half-decade. But the company expects strong recovery in 2021.

Share price 115p
2020 high 191p
2020 low 106p
Five year high (2018) 225p
All time high (2011) 342p
Change last 12 months -40%
Change last five years 98%
Change since 1995 283%
Market cap £m 203
Yield % 7.87
P/E 7
Revenue growth since 2015 543.7%
Pre-tax profits growth since 2015 From loss making to profit
Total assets/total liabilities 3.8%
Current assets/total liabilities 0.2%
Current assets/current liabilities 1.2%
net assets £m  226.0

Atalaya Mining

I think one of the benefits of this series is that it may help investors discover stocks they might not have otherwise known about, and at least give them pause for thought.

What I like about Atalaya Mining is its growth. 

Five years ago, it made a 15 million euros loss; last year pre-tax profits hit 37 million euros. Furthermore, its latest quarterly results (to the end of September 2020) showed a big jump on last year. 

It is also moving into solar, too.

Share price 239p
2020 high 239p
2020 low 81.5p
Five year high (2018) 258p
All time high (2008) 847p
Change last 12 months 29%
Change last five years 241%
Change since 2005 -9%
Market cap £m 325
Yield % N/A
P/E 10
Revenue growth since 2015 100%
Pre-tax profits growth since 2015 From loss making to profit
Total assets/total liabilities 3.5%
Current assets/total liabilities 0.5%
Current assets/current liabilities 1.0%
net assets £m  317.0

Bacanora Lithium 

Let’s face it; Lithium is a growth commodity. We can be sure that demand for Lithium will multiply several-fold over the next few years, in tandem with growth not only in electric vehicles, but also as demand for lithium-ion batteries expand with increased use of renewable energies, creating the issue of intermittent energy supply. 

It is difficult to say for sure what will happen to the lithium price, because we don’t know how rapidly supply will rise. But to keep pace with demand, supply will have to increase at quite a canter. 

Bacanora Lithium is focused on a major lithium project in Mexico.

Share price 44.5p
2020 high 52p
2020 low 15p
Five year high (2018) 136p
All time high (2018) 136p
Change last 12 months 41%
Change last five years -44%
Change since 2015 -48%
Market cap £m 100
Yield % N/A
P/E -7
Revenue growth since 2015 Loss making
Pre-tax profits growth since 2015 Loss making
Total assets/total liabilities 2.3%
Current assets/total liabilities 0.7%
Current assets/current liabilities 10%
net assets £m  32.0

All prices are approximate figures taken from 11 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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