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Any publicly-listed company that's in the business of extracting minerals from the earth is a mining stock.
This includes:
Mining is a critical sector to the Australian economy, making up for a large chunk of our resources, which has helped propel our economy as a whole.
Majors refer to mining operations that are well established, usually have decades of history, have operations around the world and have fairly steady cash flows. The majors in Australia include the likes of BHP, Rio Tinto and Fortescue Metals.
The majors have a proven history of making money. They can break down their costs into per tonnage and overall make it easier for investors to evaluate their share price.
On the other hand, juniors are small mining companies with less working capital and shorter histories than their major counterparts.
These companies are often engaged in exploration and development of new mining sites. If the exploration pays off, you've potentially invested in a very profitable enterprise. But the risk of failure is much higher.
Think of them as a type of higher-risk growth stock specific to the mining industry.
If you're more interested in the value of an underlying commodity you can also trade on the futures markets, to invest in precious metals like gold and silver directly (or via ETFs).
Thanks to its long history, economic viability and global demand, the mining industry holds great potential for profit. ASX mining stocks can pay strong dividends and represent stable long-term value for many investors.
Many industries rely on mining efforts to produce the materials needed to manufacture their wares and services. Without cobalt, electric vehicle manufacturers would flounder. Without uranium, we wouldn't have nuclear energy.
This type of global reliance on mined materials makes this industry among the more powerful and viable investment categories.
Major mining companies offer the opportunity for steady returns and dividends while junior mining companies hold the potential for rapid growth. Before investing, you should research the mining company that interests you and what materials it yields to determine potential benefits specific to the product.
According to Finder data, 39% of Australian investors own mining stocks, making it one of the most popular sectors with local investors. Of course, almost every Australian with a superannuation fund is also exposed to the industry via their super fund's investments.
The mining industry isn't immune to risk and faces several unique challenges, chief among them being economic and geopolitical shifts.
The mining industry tends to do well in an up market because the profitability of this sector is largely tied to the health of the global economy. When demand for mined metals and materials is high, mining companies are well-positioned for strong and consistent cash flow. But when demand is low in response to a down market, mining companies may suffer.
Mining companies are also vulnerable to political regulations depending on where their mines are located. Many mining stocks on the market are international companies with mine locations across the globe. A mine's location can have a big impact on a mining company's profitability as the political environment of the country the mine is located in can impact mining processes and material prices.
A mining company's profitability is greatly affected to costs of production and transportation. Any big shifts in these costs can undermine profitability.
Mining companies are "price takers." BHP for example can't directly set the price of the iron ore it sells. The price of a mineral is determined by the futures markets.
This limits the potential brand power of mining companies.
You'll need a brokerage account to invest in mining stocks in Australia. Compare options by features and fees to find the account that best meets your needs.
We currently don't have that product, but here are others to consider:
How we picked theseWe've scored over 30 share trading platforms assessing them for their core features, fees, customer experience and accessibility. Our experts give each platform a score out of 10.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Major mining stocks represent a potential long-term investment with the opportunity for steady gains. Junior mining stocks may have more growth potential but are typically riskier investments. Before you purchase either, review your platform options to find the brokerage account in Australia that's ideal for your investment goals.
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