Mining investments are looking attractive. For the last 6 months, this sector has been on the upswing. Iron, used extensively in steel production, isn’t as glamorous as gold, but its importance is critical. Gold is, of course, the standard, and will always be a good recession investment, but the bottom of that market may have passed. This may be a good time to consider the broad Mining Sector.
A big milestone was passed early this year as Rio Tinto (RTP), a huge Australian-but-global mining conglomerate entered into a partnership with Chinalco, a Chinese diversified resources company. This, followed by their May 22nd announcement of reduced iron ore prices and a settlement with Nippon, Japan’s largest steelmaker, implies some major economic ripples. This will affect many major industries, and automakers come to mind first. Infrastructure construction is another main use of steel. The newly expanded production and exploration within China has obviously led to price adjustments. At $170-plus a share, Rio Tinto stock price is historically low and may present a buying opportunity. The Australians retain major control of operations, which is auspicious. It is of interest that the Chinese have also just bought controlling interest in another Australian firm, Lynas (LYSCF,) miners of rare earths and metals, and an incredibly inexpensive penny-stock.
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Many other Australian and North American companies have historically low stock prices. Investors might consider Newmont (NEM) based in the USA but with operations in Australia, Newcrest Mines of New Zealand, Coeur D’Alene of Idaho (CDE), and Canada’s Gold Corps (GG) and Barrick (ABX). It seems important to support the free-world owners of important resources that go into aircraft, technology, and the more scary possibilities (bombs, munitions) as well as the infrastructure needed to keep our economy functioning. Gold Fields Ltd. of South Africa also mines in Ghana and may appear as a bargain at $12-something a share.
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Copper, silver, stone, and the agricultural/construction materials lime, nitrites and potash for example, are commodities in demand as our aging infrastructure is refurbished and agricultural needs increase from Canada to South America: Potash of Saskatchewan (POT), Barrick (ABX), Chemical Mining Co. of Chile, Inc. (SQM).
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Platinum will be needed for its many uses laboratory equipment, electronics, medical uses, automobile catalytic converters. This is one of the most expensive elements, next to palladium. And global availability is dwindling, so value will only go up. Coal is still used widely, but its environmental issues are also ticking. The oil sand rumors, implying that this is a cost-efficient type of oil to be culled, are interesting, but also vague about processing and environmental questions. Other elements are prominently in demand, such as lithium for batteries, medical use, alloys and glass/ceramics. Most of these mines have diversified interests or all of these metals.
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There should be caution about investing in unstable countries or companies as there are plenty of sound mining investment possibilities within the USA, Canada, South America, Australia, and New Zealand. There are risks, and thrills in this field, especially now when Mining’s counter-cyclical nature comes into play. As conventional currency and banks get shaky, we think elementally.
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Investors should consider stock options as portfolio insurance to protect their mining investments. A married put strategy consists of a combination of a stock with the purchase of a protective put option. The married put option trading strategy can be considered similar to purchasing insurance for an automobile or house. In the event the price of the insured stock drops, the put option protects against a large loss making for a nice trading strategy. The married put strategy can be combined with an income generating method to produce monthly income. An example of an income generating method is the covered call investing strategy. A covered call investing position can be considered similar to purchasing a house and leasing it with an option to buy.
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[tags] Iron, gold, Mining, Chinalco, Chinese, Nippon, Japan, Australia, rare earths, metals, Newcrest Mines, New Zealand, aircraft, South Africa, Ghana, Copper, silver, stone, agricultural, construction, potash, commodities, Canada, South America, Platinum, medical, catalytic converters, palladium, Coal, oil, lithium, alloys, ceramics, ABX, Barrick Gold Corp., CDE, Coeur dAlene Mines Corp., GG, Goldcorp Inc., NEM, Newmount Mining Corp., POT, Potash Corp. of Saskatchewan Inc., RTP, Rio Tinto PLC [/tags]