Are Mining Stocks Ready for Growth Again? Investors pile in as global growth forecasts improve

Investors flocked to mining stocks last month betting that the global economy will continue to grow in the coming months.

Extraordinary stimulus from China’s Politburo and central bank to breathe life back into the world’s second-largest economy lifted sentiment toward the sector, whose “cyclical” fortunes are closely tied to global growth expectations.

BlackRock Global Mining was the most purchased investment trust on the Interactive Investor platform during the month, with FTSE 100 Glencore and Rio Tinto both among the 10 most popular stock purchases.

Rio Tinto is also among the top 10 most-bought stocks on Fidelity Personal Investing’s ISA and SIPP platforms.

The FTSE precious metals and mining and industrial metals and mining subsectors added 12.9 and 9 per cent respectively during the month, compared with a loss of 1.5 per cent on the FTSE 100. Mining sector was also boosted by the £1.9bn acquisition of gold miner Centamin.

Britain’s largest listed miner, Rio Tinto, which generates about 60 percent of sales in China, gained 11.1 percent for the month.

FTSE 350 miners have added almost 18 per cent for the year, boosted by booming gold, silver and copper prices.

The index had previously fallen from a July high on fears of slowing growth, especially in China and the United States, highlighting the mining sector’s exposure to the fortunes of the global economy.

Citi commodities research head Max Layton said last month: “We had a really strong copper bull market earlier this year, but that has almost completely reversed in recent months.”

“I think when we look back, the energy transition alone is not enough to drive a sustained copper bull market.

“A rebound or strong global growth is really needed along with the demand for energy transition.

‘About 80 percent of copper demand still comes from non-decarbonized or non-energy transition sectors – cyclical sectors, you could call them. These are really struggling this year.”

Interactive Investor equity analyst Keith Bowman said the performance of mining stocks in the coming months will largely depend “on the health of the global economy, particularly its number one and two players, the United States and China.”

And he added: ‘More interest rate cuts are still expected in the US. The recent drop in euro zone inflation below 2 percent for the first time since mid-2021 could also cause the region to refocus on further interest rate cuts – moves from the Central Bank that could all be positive for the demand for raw materials and mining.

But how have London’s mining giants performed this year and what are analysts saying about their prospects?

Rio Tinto

The mining giant, like rival BHP, has also been hit by a sharp slowdown in demand for iron ore, largely as a result of a slowdown in China’s crucial real estate sector.

Shares in Rio Tinto, which has been battling investors over the future of its London listing, are still down more than 9.4 percent for the year despite a flurry of recent buying interest.

But while some rivals have been forced to cut dividend payments this year (a key sector draw for investors), the group remained the world’s 12th largest dividend payer in the second quarter, while overall earnings industry for shareholders sank almost 20 percent year-on-year. year after year.

Analysts appear to be broadly supportive of Rio Tinto shares, with data compiled by Stockopedia showing three “strong buy” ratings, 10 “buy” ratings, eight “hold” ratings and one “strong sell” rating.

Glencore

Glencore was the main driver of a sharp drop in mining dividend payments earlier this year when it opted to cut payments to pay down debt and fund acquisitions.

The group, which reported a loss of almost $1 billion in the first half of this year, has decided to focus investment on its LNG and steelmaking coal production facilities amid sharp fluctuations in raw material prices.

Glencore shares have fallen about 8 percent since the beginning of the year, but analysts appear to back the company with five “strong buy,” six “buy” and six “hold” ratings.

“Glencore’s balance sheet strength means the business can comfortably absorb price volatility,” eToro market analyst Mark Crouch wrote in August.

‘Shareholders will already know that returns from mining investments are sporadic. However, what matters most is the long-term trend, which for Glencore is bullish.’

Anglo-American

The 107-year-old mining giant’s 2024 year has been dominated by a major strategic restructuring, which should see the FTSE 100 company sell its nickel, coal, De Beers diamond and platinum businesses within two years.

Anglo American’s restructuring is a gamble as it rejected a proposed £39bn takeover of Australian mining giant BHP.

Some analysts say Anglo’s thin market capitalization makes it a prime target for takeover predators looking for a bargain. BHP will also have the right to attempt another acquisition after September 30 under city rules.

Anglo-Saxon actions They have risen 22 percent since the beginning of the year, largely thanks to acquisition interest.

Stockopedia suggests a more mixed outlook among analysts, with one “strong sell” rating, two “sell” ratings, and eight “hold” ratings. Nine analysts have buy or strong buy ratings.

BHP

BHP, which is primarily listed in Australia, is focused on growing its crucial copper business through current and future projects after its attempt to acquire Anglo American failed.

Boss Mike Henry, BHP’s chief executive, recently told the media that the acquisition was never “Plan A” for the company.

However, the acquisition would have boosted the FTSE 100-listed natural resources company’s copper business, which accounts for around 30 per cent of its profits.

The vast majority of analysts point to a “hold” rating for BHP, according to Stockopedia, with one “strong sell”, two “buy” and three “strong buy” ratings.

bhp shares They are down 14 percent so far this year.