4 mining stocks that could lose steam in 2021

As 2020 draws to a close, one can look back on a tumultuous year dictated by a catastrophe in the form of a COVID-19 pandemic, which has wreaked havoc and affected almost every aspect of life. The unprecedented crisis has ruined the global economy. While the same has brought some industries to a standstill, others have prospered. The mining sector was among the few that was severely affected earlier this year due to weak demand and disrupted operations. However, the sector has resolved the phase and regained the level lost due to improved commodity prices, strong demand from China’s top consumer and the resumption of operations.

Miners show resistance to vagrants of COVID-19

COVID-19 had a serious impact on demand in the automotive, aerospace and heavy equipment industries, which affected the mining sector. Metal prices were affected by declining customer demand, disrupting global supply chains and market volatility. The miners had to suspend production, slow down construction or limit operations, as governments took steps to check the spread of the coronavirus. Subsequently, during the year, the miners were allowed to resume operations (with a lot of safety measures in place), and mining was declared an essential service by various governments.

To stay afloat in uncertain times, miners have aggressively reduced operating costs and postponed capital expenditures and taken steps to improve operational efficiency. They have simplified their portfolios, eliminated non-core assets and reduced debt levels.

The miners relied more on automation and digital operations. In addition to reducing costs and driving efficiency, the technology has helped manage the risks associated with COVID-19. It supported the workforce remotely, reduced presence on the ground and helped monitor foreign operations. Industry participants also opt for alternative energy sources to minimize fuel price volatility and secure supply.

Miners are betting on price recovery

Gold gained over the year as the pandemic and its devastating impact on the global economy affected investors’ risk appetite, boosting the demand for safe haven yellow metal. Iron prices have risen 70% this year due to strong demand from China, which has initiated a massive infrastructure stimulus to support post-pandemic recovery, while supply concerns remain in Brazil and Australia. While slow production activity had an impact on silver and copper prices at the beginning of the year, the recovery of the production sector over the last six months has helped to raise prices. Copper prices have gained in recent times as demand in China has risen.

Due to the improvement in metal prices, Zacks Mining – Nonferrous, Mining – Iron, Mining – Miscellaneous, Mining – Gold and Mining – Silver industries gained 55.4%, 31.5%, 24%, 22.9% and 22 respectively, 5% a day. They outperformed the S&P 500 and the broader growth in the base materials sector by 17.3% and 18.4%, respectively. This is shown in the chart below.

According to the latest earnings trends, after remaining in the red for the last three quarters, the commodities sector is expected to return to growth, with a projected 6.9% increase in earnings for the fourth quarter of 2020. Despite this improvement , the sector is to witness a 21% drop in revenue in 2020, due to the decline in the first three quarters. However, the decline is not limited to this sector, as 13 of the 16 Zacks sectors are expected to suffer declines – mainly victims of the COVID-19 pandemic. The outlook for 2021 looks promising for the sector, with an impressive revenue growth projection of 40.5%.

While it would be prudent to add a few stocks from this growing sector to your portfolio, you need to watch out for a few stocks that, despite good performance this year, could lose momentum next year. In this article, we discuss four stocks whose prices have risen this year, but they may not prove to be good purchases for 2021.

With the help of Zacks Stock Screener, we selected four mining companies with a market capacity of more than $ 1 billion, which have surpassed the S&P 500 and the commodities sector so far, amid higher commodity prices, but no remained up for 2021. These shares have a Zacks rank # 4 (sale) and have seen their profit estimates for 2021 fall over the last 30 days.

You can see The full list of today’s Zacks # 1 stocks (Strong Buy) here.

Now give up these 4 mining stocks to avoid disappointment later

Newmont Mining Corporation NEM: Headquartered in Greenwood Village, CO, Newmont Corporation is engaged in the production and exploration of gold, copper, silver, zinc and lead. The company has operations and / or assets in the United States, Canada, Mexico, the Dominican Republic, Peru, Suriname, Argentina, Chile, Australia and Ghana. The company has a market cap of $ 48.8 billion. The company’s shares have gained 39.8% so far this year.

Zacks’ consensus estimate for the company’s earnings in 2021 has moved south by 10% in the last 30 days. Moreover, the company’s expected revenue growth for 2021 is 65%, much lower than the 96% growth expectations for this year. The stock has a rank Zacks # 4. The company’s declining production will weigh on top performance. In addition, the expected higher cost of production remains a concern for the company.

Barrick Gold Corporation GOLD: Headquartered in Toronto, Canada, the company is engaged in the exploration, development of mines, production and sale of gold and copper properties. The company has a market cap of $ 41 billion. Its shares have gained 23.9% so far this year.

Zacks’ consensus estimate for the company’s earnings in 2021 has been revised down 5% in the last 30 days. Moreover, the company’s expected revenue growth for 2021 is 20.7%, much lower than the 116% projection for this year. The stock has a Zacks rank # 4. The company has witnessed higher costs, reflecting the impact of lower recoveries and classes, higher energy costs and increased mine location that supports capital expenditures. This will continue to put pressure on the company’s margins.

Alamos Gold Inc. AGI: Based in Toronto, Canada, Alamos Gold is engaged in the acquisition, exploration, development and extraction of gold deposits in North America. He also explores silver and precious metals. The company has a market cap of $ 3.66 billion. Shares have increased by 52.7% so far.

Zacks’ consensus estimate for the company’s earnings in 2021 has been revised down 19% in the last 30 days. Moreover, the company’s expected revenue growth for 2021 is 36%, much lower than the 115% projection for this year. The stock has a Zacks rank # 4. The company has stopped construction on its Kirazli project in Turkey, which is considered to be one of the highest-yielding, undeveloped gold projects and aims to renew the mining concession. The company had previously faced protests against the project for environmental reasons.

Harmony Gold Mining Company Limited HMY: The South African-based Randfontein company is engaged in gold exploration, extraction and processing in South Africa and Papua New Guinea. The company is also exploring uranium, silver and copper deposits. The company has a market cap of $ 2.92 billion. Its shares gained 33.9% compared to last year.

Zacks’ consensus estimate for the company’s earnings in 2021 has dropped 13% in the past 30 days. The company’s expected earnings growth for 2021 is 14%, lower than the expected 760% growth for 2020. Currently, the stock has a Zacks # 4 rank.

Harmony Gold remains the largest producer in South Africa and is struggling to make money, which could lead to further restructuring. In addition to problems with the supply of electricity, the company has problems with labor that lead to high operating costs. The decline in the company’s production remains a concern. Its gold production is facing lower levels of ore recovery, which produce lower yields. Consequently, even in the scenario of rising gold prices, it will not translate into higher revenues.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our top 10 for the entire year 2021?

These 10 are carefully chosen from over 4,000 companies covered by Zacks Rank. These are our main options for buying and holding. Turn on new access Zacks Top 10 Stocks >>

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Newmont Corporation (NEM): Free Stock Analysis Report

Barrick Gold Corporation (GOLD): Free Stock Analysis Report

Harmony Gold Mining Company Limited (HMY): Free Stock Analysis Report

Alamos Gold Inc. (AGI): Free stock analysis report

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