12 Best Mining Stocks Hedge Funds Are Buying
In this piece, we will take a look at the 12 best mining stocks hedge funds are buying. If you want to skip our analysis of the mining industry and want to jump to the top five stocks in this list, head on over to 5 Best Mining Stocks Hedge Funds Are Buying.
The mining industry is responsible for powering up and providing raw materials to a variety of different industries. Whether it's bauxite for making aluminum, coal for power generation, metals for jewelry, or rare Earth metals for electronics production, mining products contribute significantly to a variety of crucial industries.
Not to mention, one particular metal, gold, is quite important in the financial world as well. Gold's relationship with the U.S. dollar is a well known phenomenon, with changes to the dollar's value also creating changes in gold prices. Gold prices are generally inversely correlated to the dollar, as the precious metal is seen as the ultimate safe haven asset. Therefore, gold is also often seen as a barometer of investor sentiment against the dollar - and one that's been quite important, particularly over the past twelve months or so. The dollar has been quite strong as of late thanks to the Federal Reserve's ten interest rate hikes that have attracted deposits in U.S. banks and lent strength to the greenback due to higher demand. However, within the period of these rate hikes, as sentiment sometimes sputtered towards a weaker currency, gold prices have also soared correspondingly.
Apart from being important for investors, gold is also becoming quite popular among central banks. The high interest rate environment and its effect on the yields for U.S. Treasury Bonds have stimulated interest among central banks to diversify away from these bonds as their reserves and turn to gold. Multiple data points favor this point of view. For instance, data from the World Gold Council shows that seven out of ten central banks believe that gold reserves will increase over the next twelve months, with 24% expecting to increase their reserves until May 2024.
Shifting our focus from macroeconomics to the mining industry, some of the biggest mining companies in the world are BHP Group Limited (NYSE:BHP), Rio Tinto Group (NYSE:RIO), Freeport-McMoRan Inc. (NYSE:FCX), and Nutrien Ltd. (NYSE:NTR). Their operations range from mining for fertilizers to metals and the firms rake in billions of dollars of revenue each year. Given the mining giant that it is, BHP has several interesting initiatives that it is focusing on these days. One of these is its collaboration with the technology behemoth Microsoft Corporation (NASDAQ:MSFT). BHP and Microsoft have teamed up to use artificial intelligence to improve productivity and extraction efficiency at the world's largest copper mine in Chile. The firm is also looking into innovative accounting methods to include the value of the environment in mine valuation estimates so that it can quantify and inform the public and investors about potential damage to the environment from their operations.
Nutrien Ltd. (NYSE:NTR), an agricultural inputs company that is one of the biggest potash mining companies in the world, expects that America will increase its major crop plantation area by eight million acres this year. At the same time, higher demand coupled with the supply chain constraints that have become an everyday occurrence these days will also ensure that the fertilizer market in the U.S. remains tight. Global potash demand is also expected to stray strong this year, and where supplies from Russia lack, those from Belarus are estimated to pick up the pace.
Finally, another mining giant, Rio Tinto Group (NYSE:RIO) is looking to grow its copper supply in America. The firm is expanding its mining activities in Utah to invest close to half a billion dollars to deliver 250 thousand tonnes of copper over the next decade. Through these investments, Rio Tinto aims to capture the growing demand for copper from the electric vehicle market which uses the material to make batteries.
Concluding our industry introduction by taking a look at what's going on in coal mining is worthwhile since the mineral has grown in popularity recently since the energy market's shakeup due to the Russian invasion of Ukraine. Here's what the management of the coal mining firm CONSOL Energy Inc. (NYSE:CEIX) had to say during the firm's first quarter of 2023 earnings call:
Overall sales into the export market accounted for 66% of our total PAMC realized coal revenue, including 33% coming from the export industrial market and 13% from the export crossover metallurgical coal market. This is a crucial development for us as it demonstrates our ability to be nimble in utilizing our export marketing and logistic advantages to offset weakness in the domestic energy markets, a unique capability that few domestic coal and E&P companies possess. Furthermore, our sales team opportunistically increased our forward sell position by 13.5 million tons in the first quarter for delivery through 2026, in essence increasing our sales backlog despite a challenging market backdrop. More importantly, the majority of these tons are part of the long-term contracts in the Indian industrial market through 2026, which is exciting, because we expect this market to expand substantially in the coming decade.
As we work to increase the capacity of the CONSOL Marine Terminal, we’ll be even better positioned to serve this growing market. As a result of our marketing efforts in 1Q ‘23, we are now near fully contracted for 2023 and have 14.7 million tons contracted for 2024. Now let me provide an update on our balance sheet management and capital allocation progress before discussing our financial results and sustainability initiatives. We continue to make considerable progress on our stated financial priority in the quarter. First, we generated $221 million of free cash flow, approximately 45% of which was deployed toward continuing to reduce our gross debt level. When factoring in our unrestricted cash and short-term investments, our total net debt on March 31 stood at $14 million.
With these details in mind, let's take a look at the top mining stocks among hedge funds, with some notable names being Teck Resources Limited (NYSE:TECK), Freeport-McMoRan Inc. (NYSE:FCX), and Newmont Corporation (NYSE:NEM).
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Our Methodology
To compile our list of the best mining stocks to buy, we first made a list of the forty largest mining companies in the world based on their market capitalization. Then, the number of hedge funds that had bought their shares as of March 2023 was determined from Insider Monkey's database of 943 hedge funds. The top companies chosen for our list of the 12 best mining stocks to buy are as follows. We excluded lithium companies from this list as they were already covered in 11 Best Lithium Stocks to Buy earlier today.
12 Best Mining Stocks Hedge Funds Are Buying
12. Kinross Gold Corporation (NYSE:KGC)
Number of Hedge Fund Investors In Q1 2023: 26
Kinross Gold Corporation (NYSE:KGC) is a Canadian firm that explores gold in different countries. The firm has an average share price target of $6, a significant upside over the current share price of $4.55.
By the end of 2023's first quarter, 26 out of the 943 hedge funds polled by Insider Monkey had bought a stake in Kinross Gold Corporation (NYSE:KGC). Out of these, the firm's largest investor is Jim Simons' Renaissance Technologies with a $120 million stake.
Along with Freeport-McMoRan Inc. (NYSE:FCX), Teck Resources Limited (NYSE:TECK), and Newmont Corporation (NYSE:NEM), Kinross Gold Corporation (NYSE:KGC) is a top mining stock that hedge funds are piling into.
11. Wheaton Precious Metals Corp. (NYSE:WPM)
Number of Hedge Fund Investors In Q1 2023: 29
Wheaton Precious Metals Corp. (NYSE:WPM) mines and sells different metals such as gold, silver, and palladium. The firm expanded its mining property portfolio in May when it acquired purchase rights from a gold mine in Canada.
29 of the 934 hedge funds part of Insider Monkey's database had invested in the firm as of March 2023. Wheaton Precious Metals Corp. (NYSE:WPM)'s biggest hedge fund shareholder in our database is Jean-Marie Eveillard's First Eagle Investment Management, through its $977 million investment.
10. Vale S.A. (NYSE:VALE)
Number of Hedge Fund Investors In Q1 2023: 29
Vale S.A. (NYSE:VALE) is a Brazilian mining giant that is involved primarily in the production of iron ore and iron pellets. The firm's shares have an average rating of Buy, with ten out of the 24 analysts covering the stock rating it as a Buy or Strong Buy.
By March 2023 end, 29 of the 943 hedge funds polled by Insider Monkey had bought Vale S.A. (NYSE:VALE)'s shares. Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital is the firm's largest investor, owning 31.5 million shares that are worth $498 million.
9. Franco-Nevada Corporation (NYSE:FNV)
Number of Hedge Fund Investors In Q1 2023: 31
Franco-Nevada Corporation (NYSE:FNV) is a gold royalty firm, meaning that it collects payments from other miners or enters into agreements with them to purchase their outputs. The firm's revenues have grown by 16.2% over the past three years, faster than most of its peers.
After sifting through 943 hedge funds for their first quarter of 2023 shareholdings, Insider Monkey found out that 31 had invested in the firm. Franco-Nevada Corporation (NYSE:FNV)'s largest shareholder in our database is Jim Simons' Renaissance Technologies through its $506 million stake.
8. Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Investors In Q1 2023: 33
Rio Tinto Group (NYSE:RIO) is a diversified British mining company that extracts a variety of metals and minerals such as diamond, iron, gold, and lithium. The firm announced in June that it will now make its own batteries in a laboratory to see how its mining products perform in the real world.
Insider Monkey's first quarter of 2023 survey of 943 hedge funds revealed that 33 had held a stake in Rio Tinto Group (NYSE:RIO). Out of these, Ken Fisher's Fisher Asset Management is the biggest investor since it has a $1 billion investment.
7. MP Materials Corp. (NYSE:MP)
Number of Hedge Fund Investors In Q1 2023: 35
MP Materials Corp. (NYSE:MP) is one of the more crucial companies particularly in today's geopolitical scene since it extracts and sells rare earth metals. After China announced restrictions on rare earth exports, MP Materials Corp. (NYSE:MP) is an important stock to watch out for since it is an American firm with facilities in the U.S.
35 of the 943 hedge funds part of Insider Monkey's database had bought MP Materials Corp. (NYSE:MP)'s shares as of Q1 2023. The firm's largest hedge fund shareholder is James H. Litinsky's JHL Capital Group since it has an $805 million stake.
6. Barrick Gold Corporation (NYSE:GOLD)
Number of Hedge Fund Investors In Q1 2023: 41
Barrick Gold Corporation (NYSE:GOLD) is a gold mining company. It is headquartered in Toronto, Canada, and has facilities all over the world.
Insider Monkey surveyed 943 hedge funds for their first quarter of 2023 shareholdings to find out that 41 had invested in the company. Out of these, Jean-Marie Eveillard's First Eagle Investment Management is the largest investor courtesy of its $785 million investment.
Teck Resources Limited (NYSE:TECK), Barrick Gold Corporation (NYSE:GOLD), Freeport-McMoRan Inc. (NYSE:FCX), and Newmont Corporation (NYSE:NEM) are some great hedge fund mining stock buys.
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Disclosure: None. 12 Best Mining Stocks Hedge Funds Are Buying is originally published on Insider Monkey.