A recovery in mining stocks could be on the way

Is it time to consider investing in this out-of-favour sector?

Mining stocks have endured a tough period, despite rising commodity prices. While gold, silver, and copper have all seen strong gains over the past year, mining companies have failed to keep pace. Investors have largely ignored the sector in favour of high-flying tech stocks, but could this now present an opportunity?

Mining stocks have lagged despite strong commodity prices

In recent months, the prices of key commodities such as gold, silver, and copper have risen significantly. Gold has benefitted from investor demand as a hedge against inflation and economic uncertainty, while copper prices have surged due to growing demand from renewable energy projects and AI-driven industries.

Yet, despite these tailwinds, mining stocks have continued to disappoint. Many of the largest mining firms have seen their share prices stagnate or decline, leading to frustration among investors. The disconnect between commodity prices and mining stock performance raises the question, 'is the market undervaluing these companies?'

Investors have favoured big tech over mining

One of the main reasons mining stocks have been overlooked is the dominance of the technology sector. Investors have poured money into companies at the forefront of artificial intelligence, cloud computing, and semiconductor manufacturing, lured by their rapid growth potential.

Meanwhile, the mining sector has struggled with concerns over environmental impact, regulatory challenges, and fluctuating demand. As a result, capital has flowed away from mining stocks, leaving valuations at historically low levels relative to earnings and asset values.

AI could be a key driver of a mining rebound

Ironically, the very AI revolution that has attracted investors away from mining could ultimately be a key driver of the sector's recovery. AI development and semiconductor manufacturing require vast amounts of raw materials, particularly copper, which is essential for wiring and electronic components.

As demand for AI infrastructure, electric vehicles, and renewable energy technologies grows, mining companies stand to benefit from the rising need for metals such as copper, lithium, and rare earth elements. If the market begins to recognize this link, we could see renewed interest in mining stocks.

A way to gain exposure: BlackRock World Mining Trust

For investors looking to gain exposure to the mining sector, the BlackRock World Mining Trust (available to invest in through us via Fidelity FundsNetwork) offers a diversified way to invest in global mining companies.

The trust has had a challenging period in terms of performance over the past few years, reflecting the broader weakness in mining stocks. However, this has led to a situation where its shares are now trading at relatively attractive levels and at a discount to their net asset value (NAV) of 9.6% *. This means investors can effectively buy into a portfolio of mining assets at a lower price than their underlying value.

Additionally, the trust currently offers an attractive net dividend yield of 4.8%*, providing investors with income while they wait for a potential recovery in mining stocks. For those with a long-term perspective, this could represent a compelling entry point.

Conclusion

Mining stocks have been out of favour, but that could be set to change. Rising demand for key commodities, particularly from AI and renewable energy sectors, may provide the catalyst for a turnaround. The BlackRock World Mining Trust offers a way to gain exposure to this potential recovery, with the added benefit of an attractive dividend yield and a discounted share price.

For investors willing to take a contrarian view, now could be the right time to consider adding mining exposure to their portfolios.

*Source: Black Rock - Fund Information (as at 31/03/25)

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