Recessions are bad news for mining companies because their products are dependent on economic activity. The Covid-19-driven economic slowdown is no exception. But all’s not lost. According to a recent report by global consulting firm PwC, the biggest 40 miners are “weathering the storm mostly unscathed”. These miners include FTSE 100 shares like BHP, Rio Tinto, Glencore, Antofagasta, Anglo American, and Polymetal International.
The consulting firm expects mining companies’ financials to take a hit this year. I reckon that as the economy recovers, they’ll ride the upward wave again. Indeed, these shares’ prices have already started rising. For the patient investor, I think buying their shares will give good capital returns in 3-5 years, if not sooner.
FTSE 100 share Glencore defies gravity
Among this set, Glencore (LSE: GLEN) is one share I have long liked (and even bought). It’s not without its detractors, though. There have been multiple corruption allegations against this Swiss multi-commodity miner. The most recent charges against the company are just a few weeks old, and are in process
In the meantime, the Glencore share price is rallying unperturbed by these developments. On average, in July its share price has been 23% higher than during March, when the stock market crashed. At its last close, it was a whole 58% higher than at the lowest point of the market crash.
This share’s last production update also boosted investor confidence, I imagine, as it said that “Disruptions to our business…have been manageable”. It was released a while ago, though, at the end of April and for the first quarter. The next update is due at the end of July. I reckon that it will show the full impact of the Covid-19-induced lockdowns.
Rio Tinto share price nears all time highs
If you’d rather wait for GLEN’s next update, I think Rio Tinto (LSE: RIO) is a great FTSE 100 share to consider too. In fact, if there’s any share that has bounced back from the stock market crash, its RIO. It’s share price is currently at almost all-time highs. It may sound like a bad time to buy the stock, but I reckon that it’s not. Here’s why.
One, its share price has actually risen slightly less than GLEN’s since the lowest point of the crash. It’s higher by 56% now, compared to GLEN’s 58%. Two, its price-to-earnings (P/E) ratio is 9.9 times, which isn’t high by any stretch. Three, its latest production update is positive for multiple commodities, which is encouraging. And lastly, RIO is still a dividend-paying stock, with a 6% yield. At a time when investors have fewer options to generate a healthy passive income than a few months ago, Rio Tinto’s attractiveness has grown. I think it’s a good share to invest £1,000, or at least a part of, in now.
Manika Premsingh owns shares of Glencore. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.