The global commodities boom is coming back at last.
After five or six years of chronic underinvestment and a surge in demand for everything from metals to minerals, commodity prices could be ready to explode.
As a sector-wide supply crunch looms, miners and producers are likely to lag behind the commodities themselves – giving savvy investors a great opportunity to find undervalued plays.
Rising geopolitical tensions, soaring global population, and a recent spike in market volatility only add to the urgency.
It is the perfect time for a bull run in what analysts are calling ‘the best commodity market in over a decade.’
Here are five companies to follow as the global commodity boom accelerates.
1) Agnico Eagle Mines (TSX:AEM)
Gold has always been an investor favourite, and with geopolitical tensions growing and cryptocurrencies struggling to maintain investor attention, it isn’t likely to lose that position any time soon.
Investors have seen some strong returns in 2018, and the market is showing no sign of slowing.
And the bullish sentiment is understandable.
Bullion is set to wrap up its third quarterly gain for the first time since 2011, while ETF holdings are close to being at their highest point in half a decade.
Exploration and mining companies such as Agnico Eagle Mines offer a great entry point into this market – often trading with a slight discount to gold prices themselves.
After a tough start to the year, Agnico Eagle Mines has rebounded in an impressive manner, and there is no sign of this momentum slowing.
With a market cap of over $10 billion, this industry giant provides investors with a great low risk play on a market that is heading out of bear territory and becoming bullish once again.
Agnico Eagle Mines’ stock is currently trading at $45.17 per share, the company has low debt and exceeded EPS expectations in each quarter of 2017.
With plans to expand, the company is set to increase its gold production by 40 percent within the next three years, from 50,000 to 70,000 ounces per year.
Agnico is not only expanding its reach within Canada, with its Meliadine gold project, but has also approved a new shaft project in Finland, which will reduce operating costs and increase production.
Having trended strongly upward in the last couple on months, this industry giant is looking like a healthy play in a sector that is set to boom.
2) Vatic Ventures (TSXV:VCV; OTC:VTTCF)
Potash is often overlooked in the world of commodities, but innovative investors are finally catching on.
As a core ingredient in almost all fertilizers, it plays a vital role in the global food market and is one of the most sought-after commodities in the world. Without it, the world could not produce enough food.
China and India rely heavily on this commodity for the cultivation of rice and palm oil, while Thailand, Indonesia, Malaysia and Vietnam make up 75 percent of the rest of Southeast Asia’s consumption.
Potash prices are increasing, with 2017 prices at around 20 percent higher than in 2016. And production has been increasing at around about 3 percent per annum, with the current production rate sitting at 60 million tonnes (KCl).
The projected growth of the potash industry in South East Asia alone is around five percent per year over the next decade – and it is exploration and mining companies that could profit from this growth.
Enter Vatic Ventures (TSXV:VCV; OTC:VTTCF), a company that anticipated the increase in demand for this essential commodity early on – and positioned itself right in the centre of South East Asia’s demand boom – Thailand.
Vatic is a Canadian company exploring and developing in Thailand, home to some of the world’s largest untapped potash reserves.
In 2016, this innovative company acquired 80 percent of Saksrithai Developments Company, a Thai mining company that has a 100 percent interest in two promising potash prospecting licenses in Thailand.
These valuable licenses sit right next to what will soon be the first major potash project to go online in Thailand. Vatic is set to start exploration drilling in May 2018.
With its proximity to the Asian market and the incredibly shallow deposits typical in this area of Thailand (around 150-350 meters deep) compared to the industry average Vatic has the opportunity to produce this valuable commodity at up to a $60 per tonne discount to its competitors.
While Canada and Russia have dominated the potash market in the past, Thailand could be about to undercut these industry giants – and Vatic is looking to prove up a large potash resource in the heart of the action.
Vatic is sitting on an opportunity that has great potential. Breaking into a market that has ready customers close at hand.
The potash boom in Thailand is poised to begin, and smart investors will be watching closely.
3) Pan American Silver Corp. (TSX:PAAS)
Silver typically lags behind gold when commodity booms begin, but it may well be heading out of this bear market early.
Silver can be used in more ways than we can imagine; in industry, jewellery, medicine, coins and electronics, to name a few.
It is conductive metal that is both strong and malleable, making it the perfect material for thousands of products. Silver is both an asset for investment and an essential for industry.
New technologies will require more silver. This includes the automotive sector, new solar-panel technology and medicine – using silver’s anti-bacterial properties for bandages and catheters.
The forecast from the growth in demand for silver in the industrial sector is estimated at around 2 percent. With the demand for solar power technologies increasing by an estimated 20 percent over the last year.
Pan American Silver Corp. is one companies that is poised for profit in this valuable market, with the goal of being the world’s pre-eminent silver producer. The company has a reputation for excellence in discovery, engineering, innovation, and sustainable development.
With seven mines based in Latin America, Pan American Silver is the world’s second largest primary silver producer. The company is currently producing 25 million ounces of the precious metal each year, and this figure is set to increase in 2018.
Pan American Silver’s revenue was up by almost 5.5 percent at $816.8 million in 2017 compared to $774.8 million in 2016. The company has a current market cap of $2.485 billion and has hugely decreased debt from $43.3 million in 2016 to just $10.6 million in 2017.
Pan American Silver is seeing increased production at most of its sites, and its revenue has far exceeded expectations.
The company works in the exploration, extraction, processing, refining, and reclamation of silver mines. On top of primarily mining for silver, Pan American Silver also produces and sells gold, zinc, lead, and copper.
Because of the diversity of its commodities, consistent expansion in mining, and steady economic growth, most stock analysts awarded Pan American Silver with a stock status of ‘buy’ throughout last year.
With the demand for silver in new technologies continuously increasing, the question is whether Pan American Silver Corp. will be able to keep up.
4) FMC Corp (NYSE:FMC)
The electric car boom, as well as the surging demand in energy storage units has sent lithium demand soaring in the last year and it is showing no sign of letting up.
At present, 95 percent of all rechargeable batteries use lithium. Accessing lithium sources proves difficult, as mining is costly and unpredictable, leaving commodity market analysts wondering who can meet the soaring demand.
Anticipated electric car production by market leaders such as Tesla relies heavily on lithium-based batteries. Unless lithium mining companies find a way to meet the necessary production levels, electric car manufacturers could find themselves fighting for whatever lithium supply they can get their hands on.
This is where FMC Corp. comes into the picture. It has been supplying lithium since initial demand by Sony for its first lithium batteries in the early 1990s.
It is one of the largest specialty chemical suppliers in the world, and is the third largest lithium chemical supplier. With a current market cap of $11.005 billion, it’s set to remain on the centre stage for lithium production.
The company has mines in South America’s ‘lithium triangle’, a region which contains 65 percent of all the lithium on the globe. It mines lithium at 95.5 percent purity, higher than any other lithium-mining company.
FMC Corp. has grown substantially over the last 7 years, with new plants in China and India, and expansion in Argentina, adding to their growing global network.
FMC also signed an deal with Nemaska Lithium (TSX:NMX), stating Nemaska would supply 8,000 metric tonnes of lithium carbonate to FMC each year from mid-2018. This will increase FMC’s production levels substantially.
Revenue was set at $94 million, in the FMC lithium production sector, in the third quarter of 2017. This showed an increase of 35 percent on the previous year.
While FMC has seen falling revenue in recent years, it may well have already reached its bottom and is set to continue this upwards trend.
With production and revenue are steadily increasing, and with its Nemaska deal and Argentina extension set to come online, FMC Corp. could not have timed the coming lithium boom better.
5) Freeport-McMoRan (NYSE:FCX)
Copper mining ties in closely with economic growth due to its diversity of use.
It is a core material when it comes to infrastructure and relatively inexpensive compared to other options.
Copper is generally used in construction, consumer products, electrical applications, transportation and industrial machinery.
New markets are opening up for copper production, including the automotive sector - for use in high efficiency motors and electric vehicles, and in the renewable energy sector - for wind and solar power.
Throughout 2017, the price of copper fluctuated from between $2.48 per pound to $3.27 per pound, with a yearly average of $2.80 per pound, according to the London Metal Exchange (LME). Copper has enjoyed higher prices so far in 2018, and is currently sitting at around $3.08 per pound, showing steady growth over the last six months.
CEOs and stock analysts are bullish on copper in 2018, and with both China and the U.S. poised to go on a building spree, the demand for copper is set to increase dramatically over the coming years.
Freeport-McMoRan is a giant in this space, with a current market cap of $ 26.495 billion and its share price having risen dramatically from $12.47 in April 2017 to $19.24 today.
This is an investor favorite when it comes playing a copper boom.
FCX is a market leader in the production of copper concentrate, cathode and continuous cast copper rod.
Freeport is expecting its copper shipments to increase by 5.4 percent in 2018. It plans to transition to underground operations in Grasberg, the second-biggest copper mine in the world, and to grow long-term production, seeing a sharp increase around 2021-22.
The ongoing demand for copper in the infrastructure sector, and a growing interest in this affordable metal for new technologies, is driving a boom that Freeport-McMoRan is ready to take advantage of.
Honorable Mentions:
Franco-Nevada Corporation (TSX:FNV): This is a CAD$15.52-billion market cap company. Some investors like the fact that FNV ties returns to the price of gold without risky exposure to direct ownership and operatorship of mines. FNV ended 2016 with a relative bang. But this is a unique case because it doesn’t own or operate any mines—so this is for the investor looking for a different kind of exposure to the metals rally: FNV secures precious-metal streams.
Franco-Nevada’s diverse interests in silver, platinum group metals, oil and gas and other resource assets are definitely a plus for those looking for exposure to these sectors.
Fortune Minerals (TSX:FT) is another player in the cobalt space. Operating in Canada’s Northwest Territories, Fortune is eyeing status as a major Canadian producer of battery-grade cobalt chemicals--but it’s also got copper and gold bismuth upside. And it’s getting a boost from the government in terms of mining infrastructure.
Fortune’s modest market cap and low buy in make it a great stock for investors looking to get a piece of the electric vehicle revolution. The company’s value has increased significantly over the past year but it hasn’t yet reached its peak.
RNC (TSX:RNX): While investor attention is about to refocus on zinc, it’s possible that nickel is being overlooked, and while this stock has been a recent top decliner, if nickel demand growth is overlooked, RNC could be a good stock to hold.
RNC's principal assets are the producing Beta Hunt gold and nickel mine in Western Australia, the Dumont Nickel Project located in the established Abitibi mining camp in Quebec and a 30% stake in the producing Reed copper-gold mine in the Flin Flon-Snow Lake region of Manitoba, Canada.
RNC’s stock price has lagged since July, but a recent uptick in nickel prices could revive this stock once again.
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Forward-Looking Statements
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 the Thailand potash resource will prove as large and as high grade as hoped; that the potash reserves can be mined; that Vatic will have sufficient funds to develop the potash fields to the point of profitability; that the price for potash will rise; that the Thai project will be able to produce potash as currently scheduled; that Vatic’s potash will enjoy lower costs to market; that Vatic’s exploration and operating costs will be lower than other potash projects; that the potash when produced by Vatic will be high quality suitable for standard use; and that Vatic will be able to carry out its 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 Vatic may not get Thai approval for its mining, production and sale/export of potash; Vatic may not be able to pay the costs of development; aspects or all of the property’s development may not be successful, production of potash may not be cost effective as expected; there is substantial political risk in Thailand, which have the potential of harming production and assets or having assets expropriated; Vatic may not raise sufficient funds to carry out its plans, changing costs for extraction and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and resource recoveries assumptions based on limited test work with further test work may not be viable; world potash prices may drop; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of its projects, that the potash reserves are not proven or cannot be economically produced on its properties, or that the required permits to build and operate the envisaged facilities cannot be obtained. Currently, Vatic has no revenues. 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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