The TSX30 recently came out, and while the number one growth name went to a technology stock, second place was perhaps even more surprising because a mining stock took the top spot. Scroll down, though, and you’ll see quite a bit lot of the mining stocks that made the top list in the past three years. What’s going on? And are there mining stocks that investors can still benefit from?
What happened
Momentum in the mining sector continues to increase, but it’s not just because of one market move. In fact, there are several reasons behind the current price increase for miners. But of course the most obvious comes from gold.
Gold has taken off, rising to US$4,000 per ounce this week. Macro risks such as inflation and geopolitical uncertainty are all high, with capital increasingly flowing into safe havens such as gold. Mining and gold stocks therefore benefit from an investment in this area.
Yet gold is not alone; copper is also shaping up to be a major gainer for mining stocks. Copper and other base or critical metals are receiving renewed attention due to the energy transition, electric vehicle needs and infrastructure demand. Some copper miners have seen supply pressure increase, leading to excellent buying opportunities. So, which stock will win?
TECK
When it comes to winners in this field, Teck Resources (TSX:TECK.B) could be a big winner for today’s investor. Teck is a diversified mining company, spanning steel production from coal and zinc to copper and even energy. Due to the diversification it is not a pure game, but it does provide resilience. It seems that this is what Anglo-American liked the company and recently announced a merger of equals between the two.
The new “Anglo Teck” is expected to be strongly biased toward critical minerals. In fact, it would provide more than 70% exposure to copper. The best part? It will still operate from Canada, which will lead to even more growth for our country. The merger is valued at $53 billion, with Anglo shareholders owning 62.4% and Teck 37.6%. Additionally, the new stock should deliver approximately $800 million in annual cost synergies in its fourth year.
In the meantime, Teck has made some changes. The miner lowered its copper guidance for its QB mine and reduced production due to tailings disposal issues. Although initially negative, the revisions are now consistent with Anglo’s previous assumptions, making the merger more robust. All things considered, it’s still a solid investment as long as the companies want to combine.
In short
When it comes to TSX mining stocks gaining momentum, Teck stock certainly belongs on that list. The mining sector is seeing renewed interest as macro conditions are favorable, with valuations offering room for upside potential. And now big names are breaking out. However, the momentum is fragile and can easily turn. If rates remain high for longer, the rally in precious metals could come to a halt. That’s why it’s important to look at solid investments like Teck instead. It’s an interesting bet because it extends across traditional resource exposure and crucial minerals, and the big merger could reshape the future.
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