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Mining may be down, but not out. The sector has been the worst hit since the new U.S. tariffs were announced.
JPMorgan analyst Dominic O'Kane says, "mining was best performing sector exiting last 3 recessions," and he expects another sharp recovery to unfold after the slide.
With the sector already pricing in a worst-case scenario, the setup for a V-shaped bounce is taking shape.
Metals and mining have been the worst-performing sector since new U.S. tariffs were announced, shedding 13% just last week. That adds to an eye-watering 50% underperformance versus MSCI Europe since January 2023. But O'Kane argues the damage is largely in the price: mining stocks already discount a recession scenario, with commodity prices 15–20% below current levels—such as iron ore at $80/ton and copper at $7,500/ton.
Still, fair value estimates suggest that miners have a serious upside even if metal prices stay flat. JPMorgan sees more than 50% total shareholder return over a two-year horizon. Rio Tinto plc (NYSE:RIO), for example, offers >65% upside, Antofagasta plc (OTCPK: ANFGF) >50% upside and BHP Group Ltd (NYSE:BHP) >65% upside from current price levels.
Read Also: Copper’s Rout Sees A Massive Intraday Price Swing, ‘Fundamentals Haven’t Changed,’ Expert Says
In the past three global downturns – 2009, 2016 and 2020 – miners bottomed ahead of the broader market and went on to outperform by roughly 100% in the next 12 months. This time, the catalyst could once again be China.
JPMorgan economists expect a RMB one trillion fiscal stimulus to be unveiled in the third quarter, which would align with the historical bottoming pattern of ~four months post-selloff.
In 2020, that timeline shrank to just one month as stimulus arrived fast and hard.
That said, this time is different: the expected 0.7% of GDP stimulus is far smaller than 2008's massive ~12% package, and no China property rescue is on the horizon.
Still, the setup remains favorable.
O'Kane's top stock picks are copper and gold-centric: Antofagasta and Lundin Mining Corp (OTCPK: LUNMF) lead his copper recommendations, while Rio Tinto offers a diversified bet with a high free cash flow yield.
On the gold side, Fresnillo plc (OTCPK: FSNPF), Hochschild plc (OTCPK: HCHDF) and Anglogold Ashanti PLC (NYSE:AU) are rated Overweight.
Several ETFs offer targeted exposure to this thesis for US-based investors. The Global X Copper Miners ETF (NYSE:COPX) and the iShares MSCI Global Metals & Mining Producers ETF (NYSE:PICK) give broad access to copper and diversified miners.
Those seeking gold exposure can look to the VanEck Gold Miners ETF (NYSE:GDX) or the iShares MSCI Global Gold Miners ETF (NYSE:RING).
These vehicles provide exposure to many of the stocks JPMorgan favors and may be well-positioned for a recovery trade.
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