In the last five years, the resources sector was the last place that any investor would have wanted to be in. Commodity prices, ranging from oil to iron ore, have fallen significantly, leading to profit declines and decreased investor sentiment. It has under-performed so much in the broad market that all relative gains from the commodity super cycle have been erased.
But the tides seem to have changed, according to Daniel Sacks and Hanre Rossouw, portfolio managers of the Investec Community Fund. “We expect the sector to recover from cyclical lows through a combination of commodity prices performing above (very bearish) expectations and improving company cost structures. Potential economic stimulus could also bolster performance in the near term,” they said in an article for BizNews.com.
Similarly, veteran mutual fund manager Joe Wickwire thinks that diversifying into mining stocks can be beneficial for the long term investor. He said that the end of the supercycle seems to have alerted mining company managers to the need to be selective in how they produce and allocate capital. These should eventually lead to supply cuts and better stock returns in the long term.
One of the mining companies that looks attractive to investors right now is Russian miner Amur Minerals Corporation (AIM:AMC), which has seen its share price soar by as much as a whopping 625 percent in the last year. In fact, it has recently grown by 120 percent in the second half of May after finally securing its long-awaited production license for its Kun Manie nickel copper sulfide project. Amur Minerals is expected to recover a wide range of minerals from the deposit, including an estimated 840,000 nickel tons over a 15-year time frame.
Though there are major risks in investing in Russia at the moment because of the country’s economic recession, the long term future for Amur Minerals remains bright. Improving investor sentiment is likely to push its share price higher over the short to medium term. Also, Sacks and Rossouw favor base metals like nickel over bulk materials like iron and coal, since the former feed more into consumer products.
Two more companies that appear to be on a bargain at the moment are Tullow Oil and Premier Oil, which both fell more than 50 percent in value in the past year. Though these two companies suffered huge losses, they also present an opportunity for new investors to buy at a very attractive price. After all, both companies appear to have significant upside potentials and favorable risk/reward profiles.
However, it is important to note that investing in the resources sector is always relatively risky, as these stocks have above average volatility and greater uncertainty than those offered by the wider index. Investors who can handle such risk are more than welcome to invest in these mining stocks and reap excellent rewards once these stocks take off.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
How injecting trillions into the economy may favor Bitcoin
Bitcoin has had a 25% drop in the last 30 days. However, the cryptocurrency may be on a very positive...
The corona crisis increases demand for loan via Fintech platforms
The Brazilian Fintech sector is developing in the light of the new coronavirus pandemic. A large number of companies now...
3 business intelligence trends to watch for in 2020
The Business Intelligence (BI) market will reach $40 billion by 2025, according to Research and Markets. The world economy is...
Agreement on the prices of medical cannabis in Germany
The costs for the health insurance companies in Germany, due to the drug price regulation, experienced a 100% increase. After...
The tourism sector in Spain asks the government for real help
The tourism sector has already practically lost the summer and expects that recovery will be much slower than previously estimated....
Featured5 days ago
The pandemic is just the trigger of an inevitable recession
Africa6 days ago
Angola might devalue the kwanza, as the country’s economy is threatened
Featured5 days ago
The winners of the Online F10 FinTech Hackathon 2020
Business6 days ago
Real estate is at risk because of the exogenous crisis caused by COVID-19