Rua Gold Inc. (TSXV: RUA, OTC: NZAUF, WKN: H8E)
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Materials stocks on the Toronto Stock Exchange (TSX) have outperformed in 2024, led by higher commodity prices for gold, copper and uranium. The S&P/TSX Composite Index Metals & Mining, which measures the performance of materials sector stocks, is up 21.8 per cent compared to the 5.9 per cent year-to-date gain in the TSX composite index.
If you’re looking for strong-performing materials sector stocks, here are three stocks that have the ability to generate returns over a longer period of time.
The price of lithium, a key battery metal, rose 1,000% between the end of 2020 and 2022 before falling rapidly over the past 18 months. While oversupply is likely to keep lithium prices under pressure in the near term, soaring battery demand from the electric vehicle and energy storage solutions sectors should boost demand over the next decade.
The U.S. government wants electric vehicles to account for 50 percent of new car sales by 2030. And new-generation automakers such as Tesla and Azure and traditional manufacturers such as Ford and General Motors are all eyeing lithium, making Lithium Americas (TSX:LAC) a top investment choice. The company is partnering with China’s Ganfeng Lithium to build lithium extraction sites in South America and has already completed a feasibility study to begin construction in Nevada. In addition, Lithium Americas has signed a lithium purchase agreement with General Motors. Analysts expect the stock to double its share price over the next 12 months.
Shares of Teck Resources (TSX:TECK.B) are up 25 per cent year-to-date and have more than doubled over the past three years, returning a whopping 163 per cent. The company recently disposed of its oil sands assets and plans to dispose of its metallurgical coal assets, which provides plenty of liquidity to invest in its copper assets and buy back shares. Copper and zinc are key drivers of the company’s future revenue and earnings.
The financial report shows that in the first quarter of 2024, copper production was up 74 per cent year-on-year and zinc concentrate production was up 10 per cent year-on-year. This means that Teck Resources has shifted from its traditional metallurgical coal business to a green operation, which could attract some ESG money to buy and drive the share price higher.
Ero Copper (TSX:ERO) is a base metals producer with copper assets in Brazil that sells gold and silver as by-products. The company has a current market cap of C$3.2 billion. So far this year, this materials stock has gained 48.4%. Next, Ero Copper’s shares will continue to rise as plans to acquire a 60% interest in Vale Base Metals’ Furnas copper project come to fruition. The plan would double the company’s copper production. Bay Street analysts expect Ero Copper’s sales could grow 51 per cent next year. The company has maintained a strong balance sheet, focusing on organic capital growth, thereby minimising dilution to shareholders.
Ero Copper stock currently trades at a forward price-to-earnings ratio of 6.6 times and a price-to-earnings-growth ratio of just 0.2 times, implying that the stock is severely undervalued and has the potential for long-term potential earnings growth.
