Lonmin Plc, Antofagasta plc And Polymetal International PLC: Time To Buy, Sell Or Hold?

The mining sector continues to decline. That’s perhaps to be expected given that commodity prices are still coming under pressure and their outlook remains downbeat. However, perhaps the major surprise so far in 2016 has been the scale of the sector’s decline, with a number of mining companies recording huge falls in their share prices even though the New Year is less than 11 trading sessions old.

For example, copper miner Antofagasta (LSE: ANTO) has slumped by 26% since the turn of the year as the copper price has continued its slide. In fact, it’s now at its lowest point in almost seven years and most investors would bet that further falls lie ahead.

Clearly, such falls would be bad news for Antofagasta, but its outlook for the full-year remains relatively positive. It’s forecast to increase its earnings by 55% in the current year and, with its shares trading on a price-to-earnings growth (PEG) ratio of 0.5, they appear to offer such growth at a reasonable price. Add to this a prospective rise in dividends of 54% and Antofagasta begins to look like a relatively appealing long-term buy.

In addition, Antofagasta recently sold off non-core assets and is now more focused on copper for its profit. This has helped to shore up its financial standing and, while the price of copper could come under further pressure, for long-term investors who can live with a high degree of volatility, Antofagasta could prove to be a strong buy.

Gold standard?

Also expected to record a rise in its earnings this year is precious metals producer Polymetal (LSE: POLY). Like Antofagasta, it mines copper but also other commodities such as gold and silver. While their prices have fallen heavily in recent years, further uncertainty regarding the global macroeconomic outlook could cause investors to buy gold due to its perceived safety relative to other assets.

Of course, gold’s outlook is also uncertain due to rising US interest rates that have historically caused a deterioration in the price of the precious metal. Despite this, Polymetal’s bottom line is expected to rise by 5% this year and with its shares trading on a price-to-earnings (P/E) ratio of just 11.7, it could prove to be a sound, albeit highly volatile, long-term buy.

That sinking feeling

However, when it comes to volatility, platinum producer Lonmin (LSE: LMI) takes some beating. That’s because its shares have sunk by a whopping 50% since the turn of the year, with today’s 10% fall showing that investor sentiment in the stock remains very weak. That’s despite Lonmin recently conducting a fundraising that it stated will allow it to follow through with planned strategy changes.

Among the changes are major cost cuts and a reduction in capital expenditure. While both of these objectives have the potential to improve Lonmin’s outlook, it continues to suffer from currency headwinds and multi-year lows for platinum prices. As such, its near-term outlook remains rather downbeat and this means that further share price falls could be around the corner.

Therefore, it may only be of interest to the least risk-averse investors for the long term – especially with other mining stocks offering low valuations and at least some scope for rising profitability over the medium term.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.