Gold miners draw Australian investors looking at international stocks
Australian retail investors have been loading up on international mining shares this year, with gold miners a popular choice, and to a lesser extent copper and nickel companies.
Data provided by broking platform eToro shows the top-traded mining stock for Australian investors is Warren Buffett’s favourite gold producer, Barrick Gold.
“Many retail investors are looking for exposure to gold without investing in the underlying commodity directly because of how volatile it is,” eToro market analyst Josh Gilbert said.
“One way of doing this is to invest in the gold mining companies themselves.”
The number of Australians with trading positions in Barrick Gold has increased 1,220 per cent this year to date, and the stock is streets ahead of the second most popular mining share, Newmont Mining, also a gold company.
“We have seen huge investment into gold over the last few months. For example, SPDR Gold Trust (GLD), the largest gold ETF, has taken $20bn in net new assets for 2020 in August,” Gilbert said in response to Stockhead’s questions.
Trading positions in Barrick Gold rose 399 per cent in Q3 compared with the previous quarter, and the number of people holding the stock has jumped 2,580 per cent since the start of 2020.
Warren Buffett’s US investment company, Berkshire Hathaway, created a stir among investors when its SEC filing in August revealed it had bought 20.92 million shares in Canadian miner Barrick.
“Whenever Warren Buffett invests into anything, retail investors across the world stand up and take notes — this is particularly true when Warren Buffett buys gold,” Gilbert said.
“With a lot of uncertainty around the economic recovery in the US, many saw this as a sign that Buffett was worried about the global economic outlook.”
The holding in Barrick was all the more extraordinary as Buffett has long stated his lack of enthusiasm for gold as an investment, partly because it pays no income, unlike shares.
“For years Buffett has famously not seen the investment case for gold, claiming ‘it has no utility’,” Gilbert said.
Third on the list of top mining stocks for Australian customers of eToro is Shanghai- and Hong Kong-listed miner China Molybdenum, which happens to own 80 per cent of the Northparkes copper-gold mine in NSW, Australia.
“Names such as China Moly have mines based directly here in Australia, so it’s a name people know,” Gilbert said.
“Although the company’s main facilities operate in China and South America, it has a large market capitalisation compared to many small capped mining stocks.”
The Big Australian, aka BHP (ASX:BHP), is fourth on the eToro list of top traded miners and is famous for its Olympic Dam copper-gold-uranium super mine in South Australia, and its Nickel West business in WA.
“BHP has recently just agreed a deal in Western Australia to acquire a nickel project, which enhances their mining capabilities and has been a top pick amongst Australian investors in 2020,” Gilbert said.
BHP appears twice in the top 20 list because of its dual-listing on the ASX and London Stock Exchange, as does Rio Tinto (ASX:RIO) for the same reason.
Freeport-McMoRan, the operator of Indonesia’s giant Grasberg copper-gold mine, is the fifth most traded stock for Australian investors on eToro.
Two Russia-based mining companies, London-listed gold producer Polymetal International and Norilsk Nickel, along with multi-national Anglo American, Rio Tinto and Switzerland-based Glencore round out the top 10 mining shares.
Table of top 20 mining shares favoured by Australian share investors. Source: eToro
Australian investors that have taken the step of investing in mining stocks have partly done so because of the media’s narrative about electric vehicles (EVs) and society’s move to new forms of energy.
“We are definitely seeing an increase in demand for people wanting to gain exposure to metals involved in the electric car phenomenon as it is a hot topic at the moment,” Gilbert said.
“The raw material demand for lithium and nickel is increasing and trends show these numbers will grow massively moving into 2024.
“Having said that, names such as Tesla weigh heavily on the price of lithium and are looking to join the supply chain to ensure costs stay low.”
“We’re also seeing this trend for electric vehicle investment among retail investors reflect in the stock market as many of our clients have bought Tesla shares this year,” Gilbert said.
Other notable mining stocks favoured by Australian investors this year are Mexican silver producer Fresnillo, Arabia-focused gold company Centamin, Swedish miner Boliden and Kazakhstan copper company Kaz Minerals.
Chile-based copper miner Antofagasta and Norwegian aluminium firm Norsk Hydro are also in the top 20.
Petra Diamonds, a London-listed African producer is last on the list of miners favoured by Australian investors, possibly because of its lacklustre share performance this year.