Find out which metals are the best mining opportunities

Analysts expect the ore sector to take advantage of the Chinese “Year of the Tiger” to grow. Despite the fact that 2021 saw a lot of volatility in mining assets, in 2022 the sector should develop, even in the midst of another year of challenges. But, globally, it remains to be seen which are the best mining opportunities – iron, uranium, lithium or copper?

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Last Thursday, December 2nd, Ohmresearch brought together three industry experts during the event Ohmresearch Global Insights 2022, to answer the question.

According to the commodities and Gilberto Cardoso mining, the iron ore segment should take advantage of the Chinese “Year of the Tiger”, with the Winter Olympics and elections at the end of 2022.

After a year of constant oscillations for the price of iron ore, which reached US$ 200 per ton in May, there was stability until July and a fall in the second half, due to demand and the decline in ore production.

According to the expert, the Winter Olympics and the Chinese elections should affect the ore in 2022.

Gilberto Cardoso also pointed out that the Chinese government imposes great restrictions on steel production in the country, mainly as a way of trying to show the world a control over the environmental impact.

“They are trying to show the world that they are committed to environmental issues. And this heavy hand of the (Chinese) government is reflected in the price of commodities. That's why iron ore dropped after the middle of the year,” he explained.

But the specialist believes that 2022 will be positive for iron ore, especially after the Olympics. What is expected is that the infrastructure and manufacturing sectors will receive traction and iron ore production will accelerate.

Given this perspective, he highlights two companies in the segment: Vale and Fortesecure Metals Group (FMG). For the expert, Vale is very competitive for having better quality materials compared to the competition, even with freight costs.

“Vale and FMG will have fantastic performances compared to sales margins and with emphasis on ESG aspects. They will pick up the growth of 2022”, considers Gilberto, stating that the Brazilian company is very discounted and there is a “great” potential for upside for the state.

Lithium and copper market deserve attention

Equity strategist and Latin America analyst Ricardo Fernandez gave tips on the best lithium and copper assets currently.

According to him, to meet the end of the combustion engine cycle, lithium, a metal widely used in batteries, must have production increased by 15% to 20% per year. This is mainly due to the growing global demand for electric cars.

In addition, the analyst recalls that lithium prices in 2018, when electric car companies began to expand significantly, when electric car companies began to expand aggressively, rose from US$ 6 thousand per ton to US $15k per ton.

“With the pandemic, lithium production was paralyzed and returned to around US$ 5 and today it is quoted at US$ 18 per ton.”

The strategist draws attention to two actions in the sector: Albemarle (A1LB34) and Sociedad Química y Minera de Chile (SQM or SOQUIMICH). “These companies can grow 20% per year over the next five years”, he projects.

However, Ricardo states that he prefers SOQUIMICH, because it trades at half the price. valuation from Albemarle. “SOQUIMICH is the largest lithium producer in the world and will remain so for the next five years. They are not cheap actions, but they are in the eye of the hurricane in terms of the electric car revolution”, he highlights.

According to the specialist, due to the expansion of electric motors, the demand for copper will increase globally in the coming years. However, this demand will likely be less than that of lithium.

He also stated that China is the main consumer of copper on the planet, using 60% of the total volume. Approximately half of this is used to build homes, a fact that can be a problem given that the Chinese segment is experiencing difficulties due to several reasons, with emphasis on the crisis of the company Evergrande.

Fernandez does not believe that the price of copper will rise much in the coming years, as this will depend on demand and the speed at which residential construction in China declines.

Investments in the uranium market

Corporate credit strategist Martin Tixier reports that yellowcakes are very promising if you think about sustainable energy for the future. yellowcakes It is a concentrated uranium material.

The demand for uranium could grow from 130% to 150% in the coming years, and the annual consumption of uranium has already grown by 16% with the completion of the construction of 57 reactors.

Martin highlights the company from Kazakhstan KazAtomProm (0ZQ) which is the largest player on the planet in uranium and has the power to significantly increase its production. The company has an Ebitda margin of 60% and is 8 times cheaper than Cameco, its direct competitor.

“KazAtomProm could increase its profit by 6,5x over the next 5 years, due to lower costs and dividend policy, which is why it is being traded at discounts”, concludes the expert.

Tixier also recalls that many countries are adding uranium to the energy matrix and that metal prices rose in 2021 and will probably continue to rise in 2022.