It's Time to Make Money in Minerals

Looking beyond traditional gold and silver miners, several leading investment experts see long-term value in more diverse metals, mining and mineral sectors. Here, contributors to MoneyShow.com highlight some favorite ideas ranging from aluminum to uranium, lithium, titanium, and a trio of royalty streamers that support gold and other mineral projects. Jim Powell, Global Changes & Opportunities Report The list of attractive investments is shrinking every month. However, there is one group that often offers investors excellent potential for long-term gains: natural resources & commodities. In fact, a new growth cycle for them is picking up speed. If history is any guide, the new bull market will last several years and be very rewarding for investors. There are several groups of commodities and raw materials that have excellent outlooks for growth. Here are the main categories: Copper The case for copper's investment potential is persuasive. Within a year, demand for the metal is projected to rise above its supply -- and remain there for as far ahead as anyone can see. The iPath Series B Bloomberg Copper Subindex Total Return ETN tracks the price of copper. It does not invest in mining companies. In many inflationary cycles, copper outperforms precious metals -- which makes it especially attractive. Investors who would prefer a copper mining stock should consider Freeport McMoRan -- the leading producer that has good reserves. The company also extracts gold, silver, and other metals that are usually found with copper. FCX has operations in Arizona, New Mexico, Colorado, Peru, Chile, and Indonesia. Aluminum The iPath Series B Bloomberg Aluminum Subindex Total Return ETN is also part of the iPath group of ETFs. There are advantages to investors from choosing different natural resource and commodity funds from the same organization. There is a cross-pollination of ideas within the group that can be useful for each of them. Switching between the funds is also facilitated. I have been impressed with the iPath group. An alternative to investing in the iPath Aluminum ETF that tracks the price of the metal, is Alcoa the leading producer of the metal that we have had in our portfolio for several years. Alcoa should continue to appreciate as new uses are found for aluminum in technology. Nickel There are several base metal funds that follow the prices of lead, nickel, zinc, and a few others. However, the funds are usually small and thinly traded. Instead, I think investors should focus only on nickel -- the most important of the base metals due to its use in high-capacity batteries. The best fund that tracks the price of nickel is the iPath Series B Bloomberg Nickel Subindex Total Return ETN . The fund is doing well and should continue to reward long-term investors. Lithium One of the most essential technology metals is lithium, which is used in high-capacity batteries in everything from smartphones to electric cars. Without an increasing supply of lithium, many of the advances in computing, energy, and communications would not exist. Investors who would like to include a lithium stock in their technology metals portfolio should consider Sociedad Quimica y Minera de Chile S.A. . Although lithium is a common element that's found globally, it is only concentrated enough in a few places to be mined profitably. One such location is in Chile, where SQM has several operations. As renewable power continues to replace power from fossil fuels, I think the demand for lithium will continue to shoot up -- and so should profits at SQM. In addition to producing lithium, SQM is an important producer of fertilizers, which makes the stock especially attractive now. Rare Earth In addition to mining companies that supply the leading technology metals, there are many lesser-known rare earth metals that are in high demand for semiconductors, specialty motors, advanced sensors, and several military products -- to name only a few. The list includes cerium, germanium, neodymium, scandium, and 14 additional metals. Some are tracked by ETFs. I don't think investors should try to pick the winner with individual rare earth metals. Instead, I recommend the diversified VanEck Rare Earth/Strategic Metals ETF . This ETF tracks the stocks of companies throughout the world that deal with the materials. I think the VanEck fund will perform well in long-term technology metal portfolios. Clif Droke, Cabot SX Gold & Metals Advisor The international price of titanium rose 55 percent in the first quarter from a year earlier, which is benefiting companies that mine the metal as well as titanium product makers. Kronos Worldwide is a leader in the production of titanium dioxide pigments. In Q1, the company reported another solid, consensus-beating quarter. Revenue of $563 million was 21% higher from a year ago, while per-share earnings of 50 cents beat estimates by 23 cents, driven by higher titanium dioxide prices. Titanium dioxide segment profit was a whopping 129% higher, due to higher selling prices and higher sales volumes. Going forward, analysts see sales rising 9% and earnings soaring 23% for 2022, which will likely prove conservative. A 5% dividend yield ties a bow on this package. Sociedad Química y Minera de Chile is a Chilean supplier of fertilizers, iodine, lithium and industrial chemicals. It's also the world's fourth-largest lithium producer by market cap and holds a 19% share of the global market for lithium and lithium derivatives. Lithium supply was unable to keep pace with demand in 2021, a trend that SQM's management expects to continue this year. In Q4, SQM's net profit surged by nearly five times, to $322 million, from the year-ago period, while revenue doubled to just over $1 billion. The company also said global lithium demand grew around 55% during 2021 from 2020, driven mostly by new demand for electric vehicles. SQM just reported net income for the three months ended March 31, 2022 of US$796.1 million, compared to US$68.0 million in the same period of 2021. Investors can buy a conservative position in SQM using a level slightly under $73 as the initial stop-loss on a closing basis. Gerardo Del Real, Junior Resource Trader Inflation -- even by the government's measure -- is at a 40-year high and speculators are taking a risk-off approach to every asset class. The pullback in overall markets due to liquidity being sucked out of the system has sent prices lower -- irrationally in many instances -- creating both fear and opportunity. In my view, the critical metals and uranium space will be the first to rebound. Uranium fundamentals are as strong as ever. As such, I want to add to the uranium exposure by buying Consolidated Uranium . Consolidated is a global uranium developer with a focus on near-term production here in the U.S. The company has the right team and assets and is in the right jurisdiction. Consolidated has 75.4 million shares outstanding -- 96.9 million fully diluted and recently traded at C$1.75, giving the company a market cap of approximately C$170 million. The company is trading near a 52-week low and has traded as high as C$3.29 before the recent pullback. Buy Consolidated Uranium up to C$1.70/US$1.40. For ETF investors, Sprott Physical Uranium Trust (SRUUF) continues to do what it's designed to do, buy and stack uranium pounds and watch the NAV go higher. The trust now has over 55 million pounds under its control, has a net asset value over $3 billion, and is back under the buy-up-to price of US$14. Mike Cintolo, Cabot Top Ten Trader The war in Russia has accelerated the plans of developed nations to convert from fossil fuels to alternative energy that largely depend on batteries. This in turn has increased demand for battery metals like lithium, which is already benefiting from a booming electric vehicle (EV) market. Battery-grade lithium has been the major focus at Albemarle in recent years and it's now one of the world's biggest lithium producers. The company has restarted a mine in Australia and acquired a lithium converter in China to meet the increased demand. Its Q1 revenue stunned the consensus by 9% (a reason for the strength), rising an eye-popping 36% from a year ago to $1.1 billion, while per-share earnings of $2.38 exceeded estimates by 73 cents. Lithium segment sales led the way, surging 97% in the quarter, to $550 million, on higher pricing and volumes and prompting the company to forecast full-year segment EBITDA growth of over 200%. Several Wall Street firms raised their price targets for the stock in response to the blockbuster earnings, as well as on expectations of continued global lithium market scarcity. Analysts see Q2 sales and EPS soaring 64% and 170%, and if management pulls the right levers, earnings should kite higher for many years. ALB was on fire in the second half of last year, rallying to $285; it corrected 40% before bottoming at $170 in March. Overall ALB looks like it wants to round out its launching pad if the market cooperates; we're OK nibbling here. Adrian Day, Global Analyst The big three royalty and streaming companies have now reported results; all three had good quarters -- close to expectations and maintaining annual production guidance. All three are now debt free, with rock-solid balance sheets. Wheaton Precious reported broadly in line with expectations, though sales were a little stronger on slightly weaker production, due to sales from inventory. Debt free, Wheaton increased its cash balance to $376 million, with liquidity of $2.4 billion. Under its dividend policy of distributing about 30% of the prior year's free cash flow, the dividend remains for the next two quarters but may increase thereafter; the current yield is 1.36%. If you do not own Wheaton, this is a good price level, but, given the near-term uncertainly on the gold price, we would look for additional weakness to add. Franco-Nevada reported slightly higher than expected, mainly due to better-than-expected oil & gas revenues. It maintained its full-year guidance of between 680,000 and 740,000 GEOs (which now include the oil and gas). Like Wheaton, Franco has some growth baked in from existing assets, in its case the ongoing ramp-up at its largest asset, the gold stream on the Cobre Panama copper mine. Franco has $1.7 billion in available liquidity, including $723 million in cash and no debt. Franco remains a core holding, but we would look for additional weakness before buying, especially if the broad market is weak. Among the streamers, Franco has the highest cash, the most diversified portfolio, and the deepest pipeline. Royal Gold also reported slightly better than expected, due in its case to higher gold from its major asset, Mt Milligan. It is maintaining its full-year guidance of between 315,000 and 340,000 GEOs. Like the other two, Royal has built-in growth this year, from the ramp up in the new Khoemacau copper mine in Botswana, on which Royal has a silver stream. The royalty and streaming companies tend to be expensive, with valuations multiples above the miners. But the balance sheets are stronger for the most part, with the certainty of cash flow higher and the exposure to inflation -- as well as other costs and risks -- lower. All of the big three royalty and streaming companies are long-term holdings for us and form the foundation of our gold portfolio. We are holders of all three but looking for lower prices to add to our positions.

It's Time to Make Money in Minerals

Investment experts highlight investment picks in copper, aluminum, nickel, uranium, lithium, titanium, and a trio of royalty streamers.

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