Will Mining Stocks Shine Next Decade?

Mining stocks are not for the fainted hearted. As we have seen in the past few months as the demand for commodities fell, mining stocks were pulled down much more than the overall market indices. However when commodities were hot, mining stocks had an incredible run.

In a recent article titled “After the bubble burst: Where next for mining?” at Trustnet, a unit trust (mutual fund) research site in UK, the author gives some very fascinating stats. The article says that the boom period that lasted “most of the past decade the FTSE Mining Index returned a massive 1,623.22 per cent.(emphasis added). Mining stocks constitute one of the major sectors of the FTSE Index – the main stock market index of UK. This is type of great returns was possible only because of the demand of commodities worldwide especially the demand from the fast growing economies of China, India and other emerging markets.

FTSE Mining Index Multi-Year Performance Chart:

The chart shows that the mining stocks started climbing around 1999 and that run lasted until the credit-crunch hit the world markets. From the chart we can also observe that the Total Return(TR) since 1986 was 2246.51%.

So what does the future hold for mining stocks?

Mining companies are dependent on the economic growth of countries especially fast-growing countries such as China, India. The government of China and India have promised heavy spending on infrastructure projects such roads,bridges, railroads, airports, etc. as part of their stimulus plans. Here in the US, the Obama administration has promised to invest heavily in upgrading the infrastructure as well. So in a way the demand for commodities might increase as these projects are implemented.However all these government initiated efforts will not start immediately. Hence these stocks will continue to be extremely volatile. Gold will continue to be a favorite for investors in these tough times. But the demand for commodities like coal, silver, iron, copper, tin, etc. are all difficult to predict at this time with any accuracy – other than the infrastructure investment mentioned earlier.

Some of the large foreign mining companies listed in the New York Stock Exchange are:

Companhia Vale do Rio Doce (RIO) – Brazil

BHP Billiton Ltd. (BHP) – Australia

Rio Tinto plc (RTP) – UK

AngloGold Ashanti (AU) – South Africa

Compania de Minas Buenaventura (BVN) – Peru

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