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Highlights
- The company’s assets, operations and mining history are critical factors in deciding if a particular mining stock is worth holding on to.
- Glencore plc has given a 91.17% return to its shareholders in the last one year.
- Investors looking for lower-risk stocks with the potential for regular dividends and some decent appreciation find mining stocks exciting.
The mining sector is critical for the functioning of the economy. Therefore, mining stocks are usually in high demand and often register a price boost during periods of expansion. However, the COVID-19 pandemic has brought to light the sector’s cyclical nature, as the prices of mining stocks moved in direct correlation with the severity of the COVID-19 pandemic, including the recovery from the crisis in 2021.
Here we take a look at two mining stocks Glencore and Rio Tinto in detail to understand if these stocks are worth keeping.
Glencore Plc (LON: GLEN)
Glencore plc is a multinational company involved in commodity trading and mining. Its headquarter is based in Switzerland. The company’s copper and zinc production for H1 2021 was in line with the guidance, while various factors impacted planned coal and nickel production during the period. Its copper and cobalt production stood at 598,000 tonnes and 14,800 tonnes, respectively, in H1 2021, slightly higher than H1 2020 levels.
Prodeco's care and maintenance and market-driven Australian supply reductions since H2 2020 resulted in a 16% period-on-period decline in coal production, while nickel production was 47,700 tonnes in H1 2021, about 7,500 tonnes (14%) below H1 2020 impacted by operational issues at Koniambo. A resumption at the second production line is expected by August this year.
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For the H1 ended 30 June 2021, revenues of Glencore rose to $93,805 million, up by 32 per cent year-on-year compared to $70,961 million in H1 2020. Adjusted EBITDA of the company hit a record of $8.7 billion for the period, up by 79 per cent from $4.8 billion in H1 2020. For its industrial business, adjusted EBITDA stood at $6.6 billion for H1 2021, an increase of 152 per cent year-on-year, due to strong metal prices and increasing mining margins.
In response to the robust cash flow, Glencore announced an additional shareholder return comprising $0.5 billion special cash distribution ($0.04/share) payable in September and a $650 million share buyback slated for completion next year. This overall top-up increases the planned shareholder returns to $2.8 billion for 2021.
Glencore Plc shares trade at GBX 340.05, down by 0.38% on 12 August at 8.12 GMT+1 with a market cap of £45,482.54 million. In the last one year, the stock has given a 91.17% return to its shareholders.
Rio Tinto Plc (LON: RIO)
Rio Tinto is an international mining group engaged in the mining and processing of mineral resources such as iron ore, bauxite, copper, etc. The company increased its spending on exploration and evaluation to $324 million in H1 2021 due to its progression into greenfield programs across eight commodities in 19 countries, particularly Winu copper-gold in Western Australia and Resolution Copper in Arizona.
For the six months ended 30 June 2021, net cash generated from operating activities was $13.7 billion, about 143% higher than H1 2020, due to higher pricing for aluminium, iron ore, and copper, while the underlying EBITDA was $21.0 billion, up by 118% compared to $9.6 billion in H1 2020. The company announced cash returns of $9.1 billion for H1 2021, comprising an interim ordinary dividend of $6.1 billion or 376 US cents per share and a special dividend of $3.0 billion or 185 US cents per share.
Rio Tinto Plc shares trade at GBX 5,644.00, down by 7.49 per cent on 12 August at 8.09 GMT+1 with a market cap of £76,132.97 million. In the last one year, the stock has given a 19.45% return to its shareholders.
Conclusion:
Several investors historically have turned to sector investments such as mining stocks. Glencore and Rio Tinto are fundamentally sound and trusted stocks in the sector, however, there are many good stocks t to consider. The company’s assets, operations and mining history are critical factors in deciding if a particular mining stock is worth holding on to. Investors looking for lower-risk stocks with the potential for regular dividends and some decent appreciation may also look for some mining stocks.
