Can These Miners Repeat Their YTD Performance: Glencore PLC (+60%), KAZ Minerals PLC (+68%) & Fresnillo Plc (+30%)

After a dismal performance during the second half of last year, shares in Glencore (LSE: GLEN)KAZ Minerals (LSE: KAZ) and Fresnillo (LSE: FRES) have been on a tear this year.

Indeed, year-to-date Glencore’s shares are up 60%, Kaz’s shares have gained 68%, and Fresnillo’s equity has risen 30%. However, some City analysts have cautioned that the share prices of these miners may have risen too far too fast, and investors shouldn’t expect a repeat of the recent performance. 

But is this really the case or are City analysts just being too cautious?

Cautious optimism

There’s been no real change in the underlying fundamentals of the mining industry since the end of last year. Concerns about China’s economy remain and many commodity markets are still oversupplied.

What’s more, at the company level, many miners continue to follow the strategic plans they set out last year. So, why has the market suddenly decided that these firms are worth significantly more than they were a few months ago?

Well, it looks as if the market is rebalancing after the capitulation that took place towards the end of last year. It seems as if investors are now viewing the mining sector with a degree of cautious optimism, although there are still a few miners that investors are giving a wide berth.

Nonetheless, Glencore, Kaz and Fresnillo are three best-of-breed miners that are well placed to ride a recovery in commodity prices. Glencore, for example, has its trading division and the company has proven that it’s committed to its strategic debt reduction goals. The company is targeting $13bn in debt reduction by the end of 2016 and has already raised $9bn.

Meanwhile, Kaz is one of the world’s lowest-cost copper producers. Gross cash costs were 230 USc/lb, below guidance of 260 to 280 USc/lb for the year ended 31 December 2015. The company is projecting copper production growth of over 50% per annum to 2018 and with its low cost base, the majority of this growth should be profitable. City analysts are expecting the company to report a small pre-tax loss of £6.5m this year but next year revenue is set double and pre-tax profits could hit £82m with earnings per share of around 11p.

Gold and silver miner Fresnillo has been insulated from the commodity slowdown as gold and silver prices have remained relatively stable. Of course, the company’s prospects are still tied to the price of the aforementioned precious metals, but year-to-date the price of silver is up by nearly 10%, and gold has gained approximately 20%. City analysts expect the company to report earnings per share of 17.6p this year, putting the shares on a forward P/E of 55.7.

Bottom line

All in all, only time will tell if these miners can repeat their year-to-date performance. However, here at the Motley Fool we invest with a long-term outlook and based on their industry-leading qualities, Glencore, Kaz and Fresnillo could all be great long-term plays on a mining sector recovery.

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Rupert Hargreaves 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.