Sector Spotlight: Mining (part 3)

This is the final part in the mining sector spotlight.

Article updated: 6 January 2021 12:00pm Author: Michael Baxter

This is a big sector, and I can't possibly look at all miners. Instead, I focus only on miners with market caps in excess of £100m and which are particularly interesting, for example, having seen rapid growth in revenue or profits. 

That does not mean there aren't good investments to be made in mining companies not included here, but I would suggest this is a pretty good start.

But this is just a guide, I urge investors to do more research before investing, all I hope to achieve here is find some potential (and excuse the pun) gems that you hadn't considered. Potential is an important word — the companies I highlight here may prove suitable investments, but might not.

Please note, some of the companies have only been listed for a few years, as a result, the data below is truncated for these companies.

Hummingbird Resources

Hummingbird Resources is an African gold producer founded 15 years ago. What I think is interesting about the company is that it has just started to make money. In four of the last five years it made a loss, but in the year to December 31st 2019, pre-tax profits came in at $9.4 million. Inevitable, for a company that has just started to make a profit, its P/E seems high. Still, since its 2010 IPO "has significantly grown its global resource inventory from an initial 0.8Moz to over 6Moz across two countries, Mali and Liberia," it says.  In the six months to the end of June, pre-tax profits hit $23.7 million. Dan Betts, CEO said: "The first half of the year has been a busy and productive period for Hummingbird, and I am pleased with the significant progress we have made, especially considering the difficulties everyone is facing due to the COVID-19 pandemic.

"The recent political unrest in Mali, while a concern, has not impacted our current operations, which are some 280kms from the capital, however, we are closely monitoring any potential impact it may have on logistics. We have a highly capable security team in-country and on-site who are keeping our operations, contractors and management teams well informed of ongoing developments so as to safeguard our employees, contractors, communities, operations and assets.

"Production has continued at Yanfolila throughout the period, and we have adapted our procedures to operate within COVID-19 restrictions, selling 56,095 ounces of gold at an average price of US$1,621 per ounce. We have also continued our planned 2020 exploration programme, which is now 75% complete. Over 12,000 metres of drilling has been completed, and significant results are being returned, increasing our confidence in our potential underground mine at Komana East and in our resource and greenfield exploration programmes.

"The first half of the year was busy in terms of M&A activity. The acquisition of Kouroussa is a significant step forward in our growth strategy to be a multi-asset producer and provides us with the potential to develop another asset into production, which also has significant exploration upside.

"During the period we made a pre-tax profit of US$23.7 million, significantly reduced our bank debt and are on track to pay off all currently held debt by the end of the first half of 2021. We are therefore in a strong position to deliver our goals for the second half of 2020, maintaining our production guidance for Yanfolila whilst progressing Kouroussa, which provides us with the potential to become a near term multi-asset producer, near doubling our current production profile."

Share price 34.5p
2020 high 41.5p
2020 low 18.5p
Five year high (2020) 41.5p
All time high (2010) 166p
Change last 12 months 53%
Change last five years 219%
Change since 2010 -89%
Market cap £m 123
Yield % N/A
P/E 30
Revenue growth since 2015 N/A
Pre-tax profits growth since 2015 From loss making to profit
Total assets/total liabilities 2.1%
Current assets/total liabilities 0.3%
Current assets/current liabilities 0.4%
net assets £m  139

Jubilee Metals

The growth rate at Jubilee Metals has been meteoric, with revenue increasing 36 fold in five years, rising to £55 million, while pre-tax profits reached £14 million in the year to the end of June 2020.

The company describes itself as "an industry-leading metal recovery business focussed on the retreatment and metals recovery from mine tailings, waste, slag, slurry and other secondary materials generated from mining operations."

Its commodity basket includes Platinum Group Metals, chrome, lead, zinc, vanadium, copper and cobalt.

It says that the company is in a "growth phase, entering into new project discussions which will increase geographic and commodity exposure."

Given all of this, I was surprised by how low its P/E ratio is.

Share price 13.25p
2020 high 13.4p
2020 low 2p
Five year high (2018) 13.4p
All time high (2007) 124p
Change last 12 months 231%
Change last five years 342%
Change since 2002 -22%
Market cap £m 280
Yield % N/A
P/E 14
Revenue growth since 2015 3,566.7%
Pre-tax profits growth since 2015 234.1%
Total assets/total liabilities 3.6%
Current assets/total liabilities 0.9%
Current assets/current liabilities 1.5%
net assets £m  94

Kaz Minerals 

Kaz is short for Kazakhstan. It is the country's largest copper producer, and the tenth-largest refined copper producer and the tenth-largest mined copper producer in the world based on 2004 production.

Growth over the last five years has been impressive, but its P/E ratio is just 7.15.

In its latest six month period, operating profit fell by around 10 per cent.

With the release of its latest half-yearly results, Andrew Southam, Chief Executive Officer, said: "Despite challenging conditions for all miners in the first half of 2020 as a result of Covid-19, KAZ Minerals recorded EBITDA of $559 million and grew net cash flow from operations by 31 per cent to $310 million. Thanks to the dedication and hard work of our employees, we have increased copper and gold production and maintained our low-cost position, recording a net cash cost of 68 USc/lb. Covid-19 risks remain, but the group is on track to achieve its full-year production guidance after an excellent performance in the first half."

Share price 659p
2020 high 650p
2020 low 269p
Five year high (2018) 1,050p
All time high (2005) 1,786p
Change last 12 months 25%
Change last five years 632%
Change since 2005 17%
Market cap £m 3,115
Yield % 1.43
P/E 7
Revenue growth since 2015 195.8%
Pre-tax profits growth since 2015 230.0%
Total assets/total liabilities 1.6%
Current assets/total liabilities 0.4%
Current assets/current liabilities 1.6%
net assets £m  2,174

Kenmare Resources

Kenmare Resources operates a mining and exploration company focused primarily on the Moma Mine in Mozambique which contains reserves of heavy minerals used to produce titanium dioxide pigment, as well as the relatively high-value zirconium silicate mineral, zircon.

Profit after tax in its latest half-year fell 41 per cent. Michael Carvill, Managing Director, said: 
"Our performance during the first half of 2020 demonstrated Kenmare's resilience and agility, effectively managing many challenges posed by the COVID-19 pandemic to continue to produce and ship our products safely. 

"Although production was weaker in H1 2020 than in the corresponding period last year, our business remained profitable, and I am pleased to announce an interim dividend of USc2.31 per share. This represents 20 per cent of profit after tax, in line with our dividend policy.

"Market conditions for titanium feedstocks continued to strengthen in H1 2020, driving a 28 per cent increase in received ilmenite prices, to US$217 per tonne, compared to last year. We have agreements for the majority of our H2 2020 ilmenite production, although market conditions are expected to become more subdued in the second half of the year.

"We continue to actively manage COVID-19-related disruption to the relocation of Wet Concentrator Plant B. The first group of specialist contractors required for the move have been through quarantine and are now working on-site, and we remain on track to begin mining at Pilivili in Q4. With close to US$100 million of cash at the end of June, we are financially well-resourced to complete the WCP B move and continue to pay dividends."

Share price 319p
2020 high 313p
2020 low 169p
Five year high (2018) 319p
All time high (2007) 13,000p
Change last 12 months 32%
Change last five years 138%
Change since 2005 -84%
Market cap £m 350
Yield % 2.07
P/E 10
Revenue growth since 2015 92.2%
Pre-tax profits growth since 2015 -394.1%
Total assets/total liabilities 7.6%
Current assets/total liabilities 1.3%
Current assets/current liabilities 4.0%
net assets £m  891


Formerly Peter Hambro Mining, Petropavlovsk is a mining and exploration company with its principal assets located in Russia. The group is primarily focused on the acquisition, exploration, development and production of precious metal deposits but also controls iron ore assets. Its principal operations located in the Amur Region, in the Russian Far East, where it has operated since 1994.

In 2018, the company commissioned its Pressure Oxidation facility. Petropavlovsk has three active gold mines: Pioneer, Albyn and Malomir and gold licences which cover an area of more than 3,200km2 in Russia.

Share price 32.25p
2020 high 39.8p
2020 low 12p
Five year high (2020) 39.8p
All time high (2006) 578p
Change last 12 months 148%
Change last five years 438%
Change since 2002 -28%
Market cap £m 1,280
Yield % N/A
P/E 42
Revenue growth since 2015 23.7%
Pre-tax profits growth since 2015 From loss making to profit
Total assets/total liabilities 1.5%
Current assets/total liabilities 0.4%
Current assets/current liabilities 1.2%
net assets £m 635

Pensana Rare Earths 

Pensana is looking to establish the world's first fully sustainable magnet metal Rare Earth Oxide producer at the Saltend Chemicals Park in the Humber Local Enterprise Partnership Yorkshire, UK.

It says that electric vehicles are forecast to drive a 350 per cent increase in magnet metal demand in the next five years.

The company claims that it will be the next major rare earth miner.

Share price 119p
2020 high 110p
2020 low 20.5p
Change last 12 months 341%
Market cap £m 153
Yield % N/A
P/E -56%
Total assets/total liabilities 16%
Current assets/total liabilities 4%
Current assets/current liabilities 4%
net assets £m 15

Pure Gold Mining Inc 

The company is engaged in the acquisition, exploration and development of high-grade gold mineral deposits in Canada.

Shares increased in value by five-gold since March 2020.

Pure Gold Mining big news came last year concerning the PureGold Mine, in Red Lake, Ontario. It said that "our first gold pour," took place on December 29th 2020.

Share price 152p
2020 high 174p
2020 low 26p
Change last 12 months 204%
Market cap £m 597
Yield % N/A
P/E -37

Rio Tinto

Not only has Rio Tinto been one of the world's largest miners for many years, since 2016, profits have almost doubled.

In the six months to the end of June 2020, net earnings fell 20 per cent. Chief Executive J-S Jacques said "We have been agile and adapted our way of working, to deliver another resilient performance while navigating the new and ongoing challenges of dealing with COVID-19. Despite the challenging backdrop, we generated underlying EBITDA of $9.6 billion, with a margin of 47 per cent, driven by our firm and stable operations, with all of our assets continuing to operate throughout the first half. As a result, we have declared an interim dividend of $2.5 billion, equivalent to 155 US cents per share, and have reconfirmed our 2020 production guidance across all commodities.

"Our world-class portfolio of high-quality assets and our strong balance sheet consistently serve us well in all market conditions and particularly in turbulent times. This, together with our disciplined capital allocation, underpins our ability to sustain production, increase our investment in the business, pay taxes and royalties to governments and continue delivering superior returns to shareholders."

Share price (AUS Dollars) 115c
2020 high 117c
2020 low 77c
Five year high (2020) 118c
All time high (2008) 122c
Change last 12 months 14%
Change last five years 174%
Change since 1999 667%
Market cap £m 72,108
Yield % 5.2
P/E 15
Revenue growth since 2015 30.3%
Pre-tax profits growth since 2015 83.3%
Total assets/total liabilities 2.1%
Current assets/total liabilities 0.4%
Current assets/current liabilities 1.6%
net assets £m  454,242

Shanta Gold

Shanta Gold is an East Africa-focused gold producer, developer and explorer. The company is focused on its flagship asset, the New Luika Gold Mine (New Luika), located in southwest Tanzania.

Five years ago, it made an $18 million loss, in 2017 and 2018 it began making a profit, although last year it made a $1.2 million loss.

Share price 17.5p
2020 high 20p
2020 low 7p
Five year high (2020) 20.5p
All time high (2006) 66p
Change last 12 months 75%
Change last five years 192%
Change since 2005 -35%
Market cap £m 183
Yield % N/A
P/E -19
Revenue growth since 2015 17.7%
Pre-tax profits growth since 2015 230%
Total assets/total liabilities 2.3%
Current assets/total liabilities 0.5%
Current assets/current liabilities 0.8%
net assets £m 96.0

Sylvania Platinum

Sylvania says that its "core business is the retreatment of PGM-bearing chrome tailings. The group has a low-risk profile which is underpinned by skilled management, low costs and a focus on cash generation and returns to shareholders."

Recently, Investors Chronicle said of the company, that it is a "platinum traders dream." profits increased nine-fold over the last five years.

Share price (AUS Dollars) 90c
2020 high 89c
2020 low 27c
Five year high (2021) 90c
All time high (2021) 90c
Change last 12 months 137%
Change last five years 1,084%
Change since 2011 84%
Market cap £m 245
Yield % 1.78
P/E 8
Revenue growth since 2015 185%
Pre-tax profits growth since 2015 833.3%
Total assets/total liabilities 7.4%
Current assets/total liabilities 4.0%
Current assets/current liabilities 9.9%
net assets £m  141


Tharis is an integrated resource group engaged in exploration, mining, processing, and the beneficiation, marketing, sales and logistics of platinum group metals (PGMs) and chrome concentrates. The group has set a near-term production target of 200 koz of PGMs, and 2.0 Mt of chrome concentrates.

Recently, Loucas Pouroulis Executive Chairman said: "Tharisa is today ideally positioned to not only grow its business from the significant asset base it has, but it also has the financial strength of a combination of the generation of free cash flow, a robust and low debt position with its balance sheet, as well as the ability to reward shareholders for their loyalty through the delivery of an industry-leading dividend policy. Growth opportunities will be pursued but not at the risk of destabilising the strong platform we have striven to build over the last five years. We want to be the investment of choice in the sector, but will only be so if we are able to meet the demanding criteria we have set ourselves in protecting our business, as well as seeking growth opportunities, which will benefit all of our stakeholders.

"Underpinning these growth pillars is our commitment to enriching the lives of our stakeholders through responsible and sustainable mining. The positive impact we make on our local, national and international stakeholders can only be sustained if Tharisa continues to strive towards both environmental and safety concerns in our approach to delivering on our business model."

Share price (AUS Dollars) 137c
2020 high 127c
2020 low 39.5c
Five year high (2017) 158c
Change last 12 months 63%
Change since 2016 185%
Market cap £m 368
Yield % 0.42
P/E 11
Revenue growth since 2015 84.5%
Pre-tax profits growth since 2015 245.5%
Total assets/total liabilities 2.7%
Current assets/total liabilities 1.1%
Current assets/current liabilities 1.8%
net assets £m  321

All prices are approximate figures taken from 4 January 2021.

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

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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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