Mining is a huge industry worldwide. From the snowy, frigid mountains in Canada to the dry, arid Australian outback and the African grasslands, mining companies crisscross the globe in search of precious metals and minerals that power our world. Investing in mining stocks involves putting money to work in capital-intensive businesses that are subject to boom-and-bust cycles dependent on the state of the global economy and commodity prices.
The worldwide mining industry is currently valued at $1 trillion and forecast to rise by nearly 50% between now and 2028. However, the near-term outlook for the mining sector is not great, as the prospect of a global recession intensifies, demand weakens, and many commodity prices trend lower. This is putting pressure on many of the leading mining stocks.
Here are three mining stocks to sell before they dig themselves deeper.
Barrick Gold (GOLD)
Leading gold miner Barrick Gold (NYSE:GOLD) reported first-quarter earnings in early May, and they were abysmal. The company announced that its profit fell 73% from a year earlier to $120 million. Earnings per share came in at only 7 cents, down significantly from 25 cents in the year earlier quarter. Revenue in Q1 totaled $2.64 billion, down 7% from $2.85 billion a year ago.
Analysts’ consensus forecast had been for earnings per share of 11 cents and $2.5 billion in revenue. Thus, Barrick’s results were especially disappointing, given that the price of gold has steadily risen this year and is hovering near an all-time high of just over $2,000 an ounce. Yet, the company reported that its gold production during Q1 amounted to 952,000 ounces, down 4% from 990,000 ounces a year earlier. So much for making hay while the sun shines.
GOLD stock has declined 15% over the last 12 months, including a 3% pullback this year.
BHP Group (BHP)
Shares of Australian mining giant BHP Group (NYSE:BHP) have not exactly set the world on fire over the last year. Over the past 12 months, BHP stock is down 12%, including an 8% decline in 2023. The company’s share price has slumped following a slew of operational missteps. Most recently, BHP was ordered to pay $280 million to compensate its employees for years of underpayment.
The company has also struggled financially, with its most recent earnings highlighting significant year-over-year declines. Revenue was down 16%, net income dipped 24%, and earnings per share sunk 23%. The company’s profit margin also declined to 25% from 28% a year earlier. These poor financial results have shaken investor confidence in BHP stock.
If there’s a silver lining to be found it is in BHP’s sky-high dividend, which currently yields 9.4% or $1.33 per share each quarter. That said, I’m not ultra-confident this yield can be maintained moving forward, given the company’s deteriorating fundamentals.
Newmont Corp. (NEM)
Another prominent gold miner that does not seem to have been able to capitalize on the rise in gold’s price this year is U.S.-based Newmont Corp. (NYSE:NEM). While the price of gold lingers near a record high, Newmont, the world’s biggest gold miner, has seen its share price tumble 14% year-to-date. Through 12 months, NEM stock is down 37%. Much of the decline has come from a lack of confidence in the company’s acquisition strategy and heavy spending.
Specifically, Newmont is in the process of paying nearly $18 billion to acquire Australian mining company Newcrest. The deal is currently running a gauntlet of regulatory approvals, but many investors and analysts are taking a wait-and-see approach to the purchase. Additionally, Newmont is spending $540 million to upgrade its gold mine in Argentina. This heavy spending has led many investors to pull away from NEM stock, making it a ringing stock to avoid, in my books.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.