There are plenty of options when it comes to investing in stocks, and mining stocks is one of them. But just like any other type of stock, it’s important for investors to do their due diligence to ensure the mining company has a solid profile.
Investors should also take a look at the stock’s price history and the location of the mine before buying, given the evolving political environments across the globe.
Let’s take a closer look at this type of investment vehicle and check out some of the best mining stocks to consider investing in.
Key Points
- Mining stocks are companies that are focused on sourcing, extracting, and processing valuable minerals.
- The mining sector is split into two main groups: majors and juniors.
- Majors are less volatile and therefore less risky, while juniors tend to be riskier investments.
- Investors can purchase individual mining stocks or more diversified mining ETFs.
What Are Mining Stocks?
Mining stocks are stocks from mineral-extraction companies. They can be divided into two separate groups: majors and juniors.
- Majors are long-established mining companies with ample capital that span across the globe and provide investors with steady cash flow.
- Juniors are the opposite of majors. They’re newer, smaller mining companies with a limited history and typically operate with minimal capital.
Best Mining Stocks In Canada
The following are some of the top mining stocks from Canadian companies:
| Canadian Mining Stock | Market Cap | Exchange |
| Barrick Gold Corp. (ABX:TSE) | $47.31 billion | Toronto Stock Exchange |
| Sterling Metals Corp. (SAG:TSXV) | $9.42 million | TSX Venture Exchange |
| Prime Mining Company (PRYM:TSXV) | $227.89 million | TSX Venture Exchange |
| First Quantum Minerals Ltd. (FM:TSE) | $14.72 billion | Toronto Stock Exchange |
| American Lithium (LI:TSXV) | $224.32 million | TSX Venture Exchange |
| Cabral Gold (CBR:TSXV) | $60.71 million | TSX Venture Exchange |
Barrick Gold Corp. (ABX:TSE)
Barrick Gold is based in Toronto and is mainly involved in the production of gold and copper. It explores, develops, and mines precious metals throughout North America, South America, Africa, Papua New Guinea, and Saudi Arabia.
- Market Cap: $47.31 billion
- Exchange: Toronto Stock Exchange
Sterling Metals Corp. (SAG:TSXV)
Sterling Metals is a mining company focused primarily on exploration opportunities throughout Canada. The company is currently exploring sources at its Copper Road Project in Ontario and Adeline Project in Labrador.
- Market Cap: $9.42 million
- Exchange: TSX Venture
Prime Mining Company (PRYM:TSXV)
Prime Mining Corporation is a Vancouver-based mineral resource acquisition, exploration, and development company that is currently mining for gold and silver in Mexico. The company is currently focused on the Los Reyes project covering over 13,800 hectares of land in Sinaloa, Mexico.
- Market Cap: $227.89 million
- Exchange: TSX Venture
First Quantum Minerals Ltd. (FM:TSE)
First Quantum Minerals is a global mining company that produces copper, nickel, gold, and cobalt. The firm has mining operations in many countries that span four continents, including Latin America, Africa, Australia, and Europe.
- Market Cap: $14.72 billion
- Exchange: Toronto Stock Exchange
American Lithium (LI:TSXV)
American Lithium is headquartered in Vancouver and was founded in 1974. It is an exploration mining company involved in the acquisition, exploration, and development of lithium resources in the Americas. The company provides infrastructure services needed to process the metal and is poised for rapid growth thanks to its partnerships with governments for new drilling sites.
- Market Cap: $224.32 million
- Exchange: TSX Venture
Cabral Gold (CBR:TSXV)
Cabral Gold is a Vancouver-based junior resources company that explores and develops gold and copper primarily in Brazil. It currently is focused on the development of the Cuiú Cuiú project which spans over 41,500 hectares in the Tapajos region. Though considered a junior company, Cabral Gold has received many public offerings to help raise capital through the TSX.
- Market Cap: $60.71 million
- Exchange: TSX Venture
Best Mining ETFs In Canada
If buying a whole stock is too much risk, you can consider investing in precious metal mining exchange-traded funds (ETFs). An ETF is a basket of securities, such as stocks and bonds, that tracks an underlying index. They are typically less risky than a single stock due to their diversified assets.
The following are some of the best mining ETFs in Canada to consider:
| Canadian Mining ETFs | Risk Rating |
| iShares Gold Bullion ETF (CGL:TSE) | High |
| iShares S&P/TSX Global Gold Index ETF (XGD:TSE) | High |
| Horizons Gold Yield ETF (HGY:TSE) | High |
| BMO Equal Weight Global Gold Index ETF (ZGD:TSE) | High |
iShares Gold Bullion ETF invests directly in physical gold and seeks to duplicate the performance of the price of gold bullion, minus fees and expenses. It is eligible for registered and non-registered accounts.
iShares S&P/TSX Global Gold Index ETF provides investors with exposure to global securities of gold producers and other related products. The goal of this ETF is to duplicate the performance of the S&P/TSX Global Gold Index. The ETF has holdings in Canada, the US, South Africa, and Peru. It is eligible for both registered and non-registered investment accounts.
Horizons Gold Yield ETF (HGY:TSE)
Horizons Gold Yield ETF offers investors exposure to gold bullion hedged to the Canadian dollar, minus fees and expenses. The ETF minimizes risk and generates income through its covered call strategy. It is eligible for registered and non-registered accounts, and pays dividends.
BMO Equal Weight Global Gold Index ETF (ZGD:TSE)
BMO Equal Weight Global Gold Index ETF tracks the Solactive Equal Weight Global Gold Index and with the goal to mimic its performance by investing in gold mining equities. The ETF is eligible for registered and non-registered investment accounts.
Benefits Of Investing In Mining Stocks
There are a few unique perks to investing in mining stocks that might make this industry an attractive one for you to invest in:
- Long History. Mining is a well-established industry that has developed familiar trends and patterns over the years, allowing for more accurate forecasting and speculation when the economy is healthy. Not only is this good for major mining companies, but juniors, too.
- Potential For Great Profit. There’s a finite supply of minerals in the earth. As the supply of minerals depletes, the opportunity for profit grows. And with a growing global population, the demand for natural resources increases.
- Various Risk Levels. Whether you have an appetite for risk or are more of a conservative investor, mining stocks have something for everyone. As mentioned, mining companies are classified as either major or junior, both of which come with their own risk level. You can match your investment strategy easily with different types of mining companies.
Risks Of Investing In Mining Stocks
While there are some advantages to investing in mining stocks, there are also a few drawbacks to consider:
- Potentially Complex Mining Process. The process of mining can sometimes be complicated, especially for newbie mining stock investors. This can make it hard to research and understand which mining company is worth investing in.
- Vulnerable To Political Regulations. Depending on where specific mines are located in the world, mining companies are at the mercy of political regulations in those particular areas. The location of a mine can have a significant effect on the profitability of a mining company since the political situation of the country where the mine is located can impact material prices and mining processes.
- Volatility. Junior mining companies come with much more risk given the short history and limited company profiles available for investors to study. Since there are hundreds of junior mining companies listed on exchanges all over the world, many are likely to fail shortly after starting. If you pick the wrong one, you could risk losing your investment capital.
Mining Stocks: Growth Or Value Stocks?
Mining stocks can either be growth or value stocks.
Growth Stocks
Growth stocks are from companies that have the potential to perform very well compared to the overall market over time.
Junior mining stocks are classified as growth stocks because they’re still in the early stages of mining, making them higher-risk stocks. However, they offer a great opportunity for significant returns as a result.
Value Stocks
Value stocks are companies that are presently trading for less than what they’re truly worth and will provide an excellent return.
Major mining stocks are considered value stocks because they’re companies that have already been long-established in the industry, and some pay substantial dividend yields too. This presents investors with less risk.
Tips On Investing In Mining Companies
Investing in mining companies can be a great way to diversify your investment portfolio and add potentially lucrative investments as part of your long-term investment strategy. Before investing, look at the following factors to maximize success:
Strong Balance Sheets
Before choosing a mining company to invest in, make sure it has strong balance sheets. The best mining companies have low debt-to-equity ratios and higher current ratios.
Market Cap
Look at the market cap of stocks, which is one measurement of a company’s size and represents the total value of its outstanding shares of stock. A high market cap could mean that the company has a stronger market presence.
Mining Location
Some mining locations may be located in parts of the world that are experiencing political volatility, which could interfere with mining activity. Ideally, you should steer clear of mining companies that are drilling in these parts, and focus more on locations of political stability.
Reserves
Look at the longevity of the company’s reserves to see how long they’re likely to last. Companies with higher reserves don’t require consistent exploration success to maximize production.
Daily Trading Volume
A high daily trading volume points to more liquidity in a stock. This makes stocks easier to buy and sell, which can be very convenient if you’re trying to time your entries and exits to maximize profitability and minimize losses.
Final Thoughts
Mining stocks can be a potentially lucrative investment if you do your homework and invest wisely. These types of investment vehicles can provide steady returns and provide long-term wealth-building opportunities while diversifying your investment portfolio.
