Three years ago, the bottom dropped out of the commodities markets, and plenty of investors were ready to call it quits. Now, everything has changed. The mining sector is red-hot. In 2017, the top fifty mining companies increased in value by $141 billion , reaching a total value of $896 billion. Included in today's commentary: Newmont Mining Corporation (NYSE: NEM), Royal Gold Inc. (NASDAQ: RGLD), Agnico Eagle Mines Limited (NYSE: AEM), Alcoa Corp (NYSE: AA), Wheaton Precious Metals Corp. (NYSE: WPM).
At the end of the year, there was a stock surge as prices shot up across the board.
With the global economy booming and demand for commodities surging, there's never been a better time to jump in on the action.
And the hottest entry point for this boom is gold, silver, and gemstone mining, where some companies are making big discoveries and even bigger profits.
Here are five mining companies ready to ride the wave of the new commodities boom in 2018:
#1 Newmont Mining Corporation (NYSE: NEM)
A company focused on gold and copper mining, Newmont has extensive operations in Australia and Indonesia.
With a market cap of $20.5 billion, Newmont has outperformed the industry average over the last six months, rising 18 percent. The company, which employs more than 12,000 people, unearthed more than 4 million ounces of gold in 2017.
And it's looking to continue that streak in 2018. Total output estimates have been revised upward, to 4.9-5.4 million ounces of gold for the year. It's expecting lower costs and higher gold prices to generate greater profits.
Newmont, like fellow gold-miners Barrick and Goldcorp, has aggressively cut costs in the last few years to increase profitability, after the commodities bust of 2015.
It has cut a lot of its debt and enters the new year with lower costs relative to the price of gold. That should ensure it a healthy profit margin.
#2 Fura Gems (FURA; FUGMF)
Amid the gold and the silver, it's worth noting that the global gemstone industry is doing better than ever.
That's particularly notable when you compare it to the weaknesses in the diamond industry, where profits have fallen and demand seems to be drying up.
Fura Gems, a mining company with a special focus on colored gemstones (emeralds, rubies and sapphires), is looking to make a splash in 2018.
The company has purchased a controlling stake in the famed Coscuez Mine in Colombia. The mine, which has been a consistent producer of emeralds for more than four-hundred years, is still only 10 percent explored. At one point, it produced 77 percent of all the emeralds in Colombia, the world's leading emerald producer.
That's great news when you consider its most famous stone: the massive 1759-carat Guinness emerald, one of the largest emeralds in the world.
At a per-carat valuation of $9,800, the massive stone could be worth $17 million, and perhaps much, much more.
While the diamond market faces a decline, colored gemstones are more popular than ever. Fura Gems hopes to capitalize on that demand by producing emeralds from its Coscsuez property and rubies from its new mine in Mozambique.
The company may be small, with a market cap of only $38 million, but it's got a lot going for it.
CEO Dev Shetty came to Fura from Gemfields Plc. While there, Shetty performed miracles. He took the company from a $209 million annual loss to an asset valuation of over $1 billion in over five years, through major discoveries in Colombiaand Mozambique .
NEWS UPDATE: Fura Gems has just released results of their ruby drilling campaign in Mozambique. Click Here for their latest release
Given his track record, it's possible Shetty will bring the same success to Fura Gems. With a mere $10 million investment in Coscuez, the company could repeat Gemfields' performance: the company realized $225 million from only seven auctions.
With that kind of profit potential only months away, Fura Gems could be really undervalued.
#3 Royal Gold Inc. (NASDAQ: RGLD)
It was a very good year for Royal Gold Inc. last year. Despite the price of gold growing only 9 percent, the company saw its own share price increase by 38 percent.
The company reported record levels of revenue and operating cash flow in FY 2017, and pumped up its dividend.
A streaming and royalty-based company, Royal Gold doesn't get directly involved in mining but rather retains a portfolio of gold and silver investments that allows it to pay out dividends to investors. It has a market cap of $5.86 billion.
The company owns interests in 196 properties scattered across six continents, including 39 producing mines and 23 projects in the developing stages.
Now, with a fresh acquisition at the Rainy River mine in Canada, Royal Gold is poised for its best year ever. The mine is expected to produce a gold stream of 15,000 ounces and a silver stream of 1.86 million ounces, which could double the company's silver assets from FY 2017.
#4 Agnico Eagle Mines Limited (NYSE: AEM)
Formed in 1972 through the merger of two successful mining firms, Agnico Eagle has current projects scattered across the globe, though it's mostly focused on Canada.
The company's performance in 2017 was reasonably strong, as it basically matched the gold miners index (GDX) and gained around 10 percent, putting it on par with Newmont Mining.
Agnico Eagle has a track-record of beating expectations. In the last quarter it exceeded its own estimates, delivering earnings of 26 cents a share instead of just 17 cents.
The CEO Sean Boyd feels gold is a quality investment and a perfect way to diversify a portfolio-unlike crypto-currency, which has gotten all the attention lately.
"I'd rather own gold than bitcoin," Boyd told CNBC. "It's proven itself." Boyd feels certain gold will retain its value despite changes in technology and the current interest in alternative currencies like Bitcoin.
#5 Alcoa Corp (NYSE: AA)
Like a lot of miners out there, Alcoa had a strong year in 2017. A firm based primarily in aluminum and bauxite mining, Alcoa saw its stock double last year, and increased its free cash flow from a low, low $3 million to an astonishing $288 million.
The company's cash balance by year's end was $1.1 billion.
Alcoa is the result of a split, when the old Alcoa divided its operations and spun out a new firm, Arconic. Alcoa focused entirely on aluminum, which at the time of the separation was experiencing a glut. The future for Alcoa looked grim.
But now the tables have turned. The market for bauxite, aluminum and related products is strong and expected to grow even stronger in 2018.
Alcoa, even while it was raking in the cash, focused on growth projects in 2017. That strategy should pay dividends in the new year, and while the stock price likely won't double again, it's sure to continue its winning streak.
And while the company's performance in Q4 was a little on the underwhelming side, that's resulted in a stock price dip that gives investors a golden opportunity.
Wheaton Precious Metals Corp. (NYSE: WPM) is Canadian precious metals streaming company, focusing primarily on gold and silver sales. The company produces a massive 26 million ounces of silver, and sells over 29 million, produced by the links of industry giants Barrick Gold and Goldcorp. The company's agreements span across North and South America, with the majority being in Mexico.
By. Charles Kennedy
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This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that Fura's property can achieve mining success for quality gemstones; that the gems when produced will be high quality; that tastes will move away from diamonds to colored gems; that Fura will be able to increase production through modern methods and increase the value of its assets through branding and auction sales; and that Fura will be able to carry out its expansion and other business plans. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the Company may not be able to finance its acquisitions, expansion or other business plans, aspects or all of the properties' development may not be successful, mining of the gems may not be cost effective, changing costs for mining and processing; increased capital costs; marketing plans may not work out as well as expected; the timing and content of work programs may change; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumptions based on limited test work with further work may not be viable; additional high value gem properties may not be available for Fura to acquire, or Fura may not be able to afford them; competitors may offer better quality or better marketing strategies; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of its projects, that the gems cannot be economically produced on its properties, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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