Is the base-metals rebound on solid ground?

Unreported inventories are a hidden risk.

Andrew Hepburn 23 March, 2018 | 5:00PM

Attendance in early March at the annual Prospectors and Developers Association of Canada convention in Toronto, which bills itself as the "world's premier mining and exploration" event, was the highest since 2013. The 25,606 attendees are a sign, PDAC organizers say, "that the mineral exploration and mining industry has regained its swagger and is building momentum."

For investors in base-metals mining stocks, the question of whether the industry is back in a durable bull market is of the utmost importance. Prices for key metals such as copper, nickel and zinc all plummeted from 2014 to 2016, wreaking havoc on stock prices. Copper, for its part, had sat comfortably over US$3 per pound in August 2014, yet by January 2016 it touched the US$2 mark amid a strong U.S. dollar and fears over Chinese demand.

The rebound in prices since the bottom has been dramatic. Copper is back over US$3, zinc has more than doubled off its lows and nickel is up over 50%. Base-metals stocks have been stellar outperformers:  Vale SA (VALE), which produces iron ore in addition to other base metals, fetched US$2.45 per American Depositary Receipt (ADR) just over two years ago, and was trading this week at US$12.83.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Ero Copper Corp19.85 CAD1.22
Glencore PLC ADR4.62 USD-2.74
Rio Tinto PLC ADR64.42 USD-0.46
Vale SA ADR11.51 USD-3.11

About Author

Andrew Hepburn

Andrew Hepburn  Andrew Hepburn is a freelance financial writer based in Toronto. He writes about investments, market trends and personal finance. He has written for Maclean's, the Globe and Mail, RateHub.ca and Canadian MoneySaver.

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