Best mining stocks

Mining is as old as civilization itself, and the hidden treasures beneath our feet have long been the life force of our technological advancements.

This ancient craft is poised to become even more pivotal, considering the multitude of metals required for producing semiconductors and rechargeable batteries. We’re going to unearth some rock-solid mining stocks that are like magnets for market attention and may be worth considering for your portfolio.

What are the best mining stocks?

This sector is in constant flux and finding the best mining stocks can feel like trying to navigate a labyrinthine network of tunnels in complete darkness. To give you some starting inspiration, we’re shining our headlamp on these top stocks from the S&P Global Mining Reduced Coal Index.

Stock	Icon	1-year performance (to Aug. ’24)	5-year performance (to Aug. ’24)	Link to invest
Agnico Eagle Mines (AEM)		50.96%	23.51%	Invest with XTBCapital at risk
Newmont (NEM)		16.18%	20.50%	Invest with XTBCapital at risk
Barrick Gold (ABX)		12.72%	3.59%	Invest with XTBCapital at risk
Rio Tinto AU (RIO)		3.82%	34.90%	Invest with InvestEngineCapital at risk
Anglo American (AAL)		-0.09%	19.96%	Invest with XTBCapital at risk
Rio Tinto (RIO)		-1.31%	20.85%	Invest with XTBCapital at risk
Freeport-McMoRan (FCX)		-3.36%	319.18%	Invest with XTBCapital at risk
BHP Group (BHP)		-11.51%	19.98%	Invest with InvestEngineCapital at risk
Glencore (GLEN)		-14.21%	69.50%	Invest with XTBCapital at risk
Vale (VALE3)		-16.02%	25.35%	Invest with InvestEngineCapital at risk

What are mining stocks?

Mining stocks represent equity in companies involved in the extraction and processing of minerals and other geological materials from the earth. These firms unearth valuable resources like gold, silver, copper, and coal, supplying raw materials for various industries worldwide.

Types of mining stocks

The mining sector is multifaceted, offering investors a wide range of stocks that cater to different market demands and resources. Here are some of the main categories:

• Precious metal miners. This category includes companies that mine high-value metals like gold and silver. They often attract investors during times of economic uncertainty as a hedge against inflation. Barrick Gold (GOLD) and Newmont (NEM) are popular examples.
• Base metal miners. These companies focus on extracting industrial metals such as copper and nickel, which are essential in various manufacturing and construction processes. Major players include Freeport-McMoRan (FCX), specialising in copper, and Glencore (GLEN), known for its diversified mining operations.
• Fossil fuel miners. This segment comprises firms involved in the extraction of fossil fuels like coal, which is used extensively in power generation and steel production. Companies like Vale (VALE) operate in this space, though it’s worth noting that Vale is also a significant player in iron ore mining.
• Diversified miners. Firms in this category operate mines that produce a variety of minerals and metals, offering a diversified portfolio of mining assets. Companies like Anglo American (AAL) and Glencore (GLEN) fit this profile, with operations spanning across several types of resources, providing a buffer against the volatility of any one commodity.

How to invest in mining stocks

1. Open a sharing-dealing account. The first step in investing in mining stocks is to open a share trading account. Choose a platform that suits your needs, whether it’s one with robust research tools, low fees or a user-friendly interface.
2. Fund your account. Once your account is set up, you can deposit funds. You can do that via a bank transfer, debit card or any other means allowed by your platform.
3. Research and choose mining stocks. Research the best mining stocks for your portfolio and then search for them on your chosen platform. You can search by company name or ticker symbol.
4. Buy shares. Once you’ve found the mining stock you’re interested in, select the amount you want to invest and hit and create an order to buy shares. And just like that, you’re now officially an investor in the mining sector.

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Why do people want to invest in mining stocks?

Investors are increasingly sitting up and paying attention to mining stocks due to the sector’s critical role in supplying materials for the global energy transition. As more and more industries shift towards electrification and renewable sources of power, metals used in these technologies like copper, lithium, and nickel are predicted to experience a spike in demand.

Forecasts suggest that by 2050, we could see nickel demand triple, copper demand more than double, and demand for lithium chemicals increase sevenfold. At the same time, many critical metals are facing supply constraints. All of this could lead to higher commodity prices, and in turn, higher share prices for the best mining stocks.

Finder survey: Would Brits consider investing in mining stocks?

44% of people we surveyed said they already invest in mining stocks or would consider investing in mining stocks.

Advantages of investing in mining stocks

Investing in mining stocks can be a glittering opportunity. There are a trove of benefits that may catch your eye:

• Diversity. Mining stocks represent an opportunity to invest in commodities across a wide spectrum. This includes precious metals like gold and silver, base metals like copper and zinc, and energy materials like coal and uranium. This variety allows investors to diversify their holdings and mitigate risk across different market sectors.
• Dividend yields. Many mining companies are known for paying beefy dividends, providing investors with a regular income stream (although not guaranteed). At the start of 2024, Glencore was offering 8.6%, Anglo American 5.8% and Rio Tinto 4.6%.
• Supply and demand imbalances. With demand for metals used in renewable technologies set to soar over the coming decades, some analysts are predicting a “commodities super cycle” that could send prices into the stratosphere.
• Inflation hedge. Historically, mining stocks, especially those in precious metals, have acted as a hedge against inflation. As inflation rises, the value of the underlying metal often increases, making these stocks an attractive investment during economic uncertainty.

Risks of investing in mining stocks

We’re not saying the groundwater’s poisoned, but it’s important not to gulp down all the hype around mining stocks; make sure to do some due diligence before venturing into the sector because there are some key risks to be aware of:

• Commodity price volatility. The profitability of mining companies is heavily dependent on the prices of the commodities they extract. If a global recession hits, it would likely drag metals prices even further into the doldrums.
• Operational challenges. Mining is a complex operation fraught with technical challenges. Issues such as equipment failures, unexpected geological conditions, or water management problems can lead to production delays and going over budget.
• Regulatory and political risks. Mining companies often operate in multiple jurisdictions and can be subject to stringent and varying regulatory environments. Changes in mining policies, tax regimes, or environmental regulations can affect operations and profitability. Additionally, political instability in certain regions can pose significant risks to mining projects.
• Environmental and social governance (ESG) concerns. Mining activities can have substantial environmental impacts, leading to increased scrutiny from governments, environmental groups, and society at large. Companies failing to meet ESG standards may face opposition, legal challenges and reputational damage.

Our expert says: What’s the best junior mining stock?

"Junior mining stocks are miners in the early stages of exploration and production. These companies are a lot smaller than the big players and this gives them the advantage of agility and adaptability. This leaves potential for massive growth but also the possibility of never striking gold.

Junior gold miners are the most popular stocks in this sub-sector, and because it’s such a fast-paced environment, it can be worth using an exchange-traded fund (ETF) like the VanEck Junior Gold Miners ETF (GDXJ), for example. This way you can access a selection of junior miners, making sure you’re not overexposed to a single miner."

George Sweeney, DipFA

Deputy editor

Alternative ways to invest in mining stocks

Aside from directly investing in individual mining stocks, there are other options giving you exposure to this sector:

• Index Funds and exchange-traded funds (ETFs). Investing in ETFs or index funds that focus on the mining sector is a useful alternative. These funds are made up from multiple mining-related stocks, offering broader industry exposure and potentially lowering your risk through diversification.
• Investment funds. In this approach, a company pools money from investors and then allocates it across a diversified portfolio of mining stocks. While this offers the advantage of professional management, investors are required to pay a fee for the expertise and services provided by the fund managers.
• Investment trusts. Similar in many ways to investment funds, investment trusts also pool money from investors to invest in a portfolio of stocks. Because investment trusts are closed-ended, managers can use a long-term strategy as shares trade on stock exchanges like normal companies (so they don’t have to sell investments if investors want to exit their position).

Pros and cons

Bottom line

Mining stocks offer a golden opportunity to tap into the veins of our planet’s rich resources. There’s a long list of metals that, despite conjuring only dull memories of GCSE chemistry classes, are in fact crucial for powering our modern world.

However, investing in this sector and finding the best mining stocks requires a keen eye for potential pitfalls, from volatile commodity prices to geopolitical tremors. With the right map and a sturdy helmet – in the form of thorough research and a balanced approach – the journey into the world of mining stocks can lead to a treasure trove of opportunities for the savvy investor.

Frequently asked questions

• Can you make money in the mining industry?

  Yes, investing in mining can be profitable with careful stock selection and portfolio management. However, it's important to note the inherent risks and market volatility in the mining sector.

• Why invest in mining stocks?

  Mining stocks offer growth potential and diversification. They supply critical materials for various key industries, making them a significant part of the global economy.

• What are the downsides of investing in mining stocks?

  Risks include commodity price volatility, operational challenges, and regulatory and environmental hurdles – all of which can affect a company's profitability and stock performance.

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To make sure you get accurate and helpful information, this guide has been edited by George Sweeney, DipFA as part of our fact-checking process.