Can Mining Companies Weather the Precious Metals Storm?

Mining companies

You can tell from their performance this year that mining companies mainly take their prices from precious metals themselves. There are a few company-specific and sector-specific phenomena that affect these mining stocks. Companies like Agnico-Eagle Mines (AEM), Centerra Gold (CG), and Alacer Gold (ASR) have seen positive returns for 2015 so far—unlike most mining companies. These three companies’ prices rose 11.2%, 31.2%, and 8.4%, respectively, on a year-to-date basis. These stocks seem to be less sensitive to the precious metals rout. Together, these three stocks make up 7.2% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).

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Mining ETFs

The above examples show how a few mining companies have performed well regardless of the severe fall in precious metal prices. Even some gold-mining ETFs—like GDX and the VanEck Vectors Junior Gold Miners ETF (GDXJ)—have comparatively withstood the tough climate this year, though their returns remain negative. The year-to-date returns for GDX and GDXJ are -23% and -19%, respectively. Though the losses are substantial, these funds have relative strength compared to other ETFs and mining companies.

Investors interested in the precious metals industry likely are awaiting the upcoming US data that could determine the country’s economic future. Is a rate hike coming, or just more teasers from the Federal Reserve? The interest rate hike could make gold and the associated metals lose some luster. But the likely effect on the mining stocks individually needs a thorough company analysis. Still, the overall impact on the precious metals mining sector will probably be negative.