Rising global demand for various minerals and metals has been encouraging mining companies to increase their production capacity. Due to a shortage of manpower during the pandemic, some companies invested significantly in technology solutions last year to make alloys and control the operations in their mines. This helped mining companies lower their operating expenses significantly in the second half of 2020.

Furthermore, the interest by governments worldwide in achieving net-zero carbon emission has been driving the demand for mining products that are crucial in achieving sustainability goals. Also, rising inflation in the United States has been driving investment demand for precious metals. The global mining market is expected to grow at a 7% CAGR over the next five years to reach $2.43 billion by 2025.

Investors’ optimism in mining stocks is evident in the SPDR S&P Metals & Mining ETF’s (XME) 129.6% gains over the past year. This compares to the SPDR S&P 500 ETF Trust’s (SPY) 39.6% gains.

Therefore, we think it wise to invest in small-cap mining stocks Materion Corporation (MTRN), Nexa Resources S.A. (NEXA), and Sierra Metals Inc. (SMTS) now.

Materion Corporation (MTRN)

MTRN produces and supplies highly engineered advanced materials used in a variety of electrical, electronic, thermal and structural applications. The company’s products include precious and non-precious specialty metals, inorganic chemicals and powders, specialty coatings, beryllium and beryllium composites, ceramics and engineered clad and plated metal systems. It distributes its products through company-owned facilities, and independent distributors and agents worldwide. MTRN has a $1.57 billion market capitalization.

On May 17, MTRN partnered with The Vera C. Rubin Observatory to help build a first-of-its-kind custom optical filter set to be used on the Legacy Survey of Space and Time Telescope (LSST). MTRN’s deep knowledge of materials and its powerful technical insights have enabled the design and fabrication of custom hardware and software infrastructure to support optical metrology, data capture and analysis, and vacuum coating technology. This partnership continues to build on MTRN’s 50-year legacy of supporting space exploration and observation.

On March 1, Radian Audio, a California-based original speaker manufacturer, partnered with MTRN to manufacture Truextent premium acoustic beryllium diaphragms. Though MTRN has been supplying Truextent acoustic beryllium speaker domes, cones and diaphragms to global makers for some time, this partnership will allow  MTRN to produce best-in-class audio components, meet the growing demand for high-end loudspeakers in both the pro audio and home audiophile markets, and support Radian’s continued growth into the next decade.

During its  fiscal year 2021 first quarter, ended April 2, 2021, MTRN’s net sales increased 27.5% year-over-year to $354.39 million. The company’s gross profit came in at $66.80 million, which represents a 49.9% improvement year-over-year. Its non-GAAP operating profit is reported $20.10 million for the quarter, up 123.3% from the prior-year period. While its non-GAAP net income increased 111.3% year-over-year to $16.90 million, its non-GAAP EPS also increased 110.3% year-over-year to $0.82.

Analysts expect MTRN’s EPS to improve 53.1% year-over-year for the current quarter, ending June 30, to $0.75. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its consensus revenue estimate is expected to be $343.50 million for the current quarter, which represents a 26.5% rise from the prior-year period. Analysts expect the stock’s EPS to grow at 12% per annum over the next five years.

MTRN has climbed 50% over the past year to close yesterday’s trading session at $77.11. Over the past nine months, the stock has gained 33.9%.

MTRN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

The stock has an A grade for Growth, and a B grade for Value and Sentiment. In addition to the POWR Ratings grades we’ve just highlighted, one can see MTRN’s ratings for Momentum, Quality and Stability here.

MTRN is ranked #8 of 42 stocks in the Industrial – Metals industry.

Nexa Resources S.A. (NEXA)

With a market capitalization of $1.55 billion, NEXA is a Luxembourg-based company engaged in the mineral resources industry. The company produces, refines, processes, and sells zinc, copper, silver, lead, gold, and sulfuric acid. Its mining segment comprises mines located in Peru and Brazil, which includes mineral exploration activities and the production of zinc, copper, and lead concentrates.

On May 12, 2021, NEXA expanded its operations in entrepreneurship and innovation through an international partnership with the Israeli company IBI-Tech. This partnership will allow the exchange of Israeli technologies, solutions, products and services capable of responding to the main challenges of NEXA’s operations in Brazil and Peru. Furthermore, it will connect Israeli startups and entrepreneurs to the mining industry in these two countries.

NEXA acquired 29.90 million common shares of Tinka Resources Limited in a private transaction at a market price of C$0.26 per share, on March 17. Tinka’s Ayawilca zinc-silver project is one of the largest zinc projects in development in Peru, with excellent development potential as well as resource expansion. With this acquisition, NEXA hopes the project will be helpful for its base metal mines in Peru and maintain the long-term sustainability of its business.

For its fiscal year 2021 first quarter, ended March 31, NEXA’s net revenues came in at $602.93 million, which represented a 36.4% rise year-over-year. The company’s gross profit increased 254.8% year-over-year to $180.15 million. Its operating income is reported at $120.76 million for the quarter, compared to a loss of $508.48 million in the first quarter of 2020. NEXA’s net income was  $31.61 million, compared to a loss of $613.8 million in the prior-year period. And its EPS is reported at $0.17 for the quarter, compared to a loss per share of $3.95 in the year-ago period.

A$0.32 consensus EPS estimate for the next quarter, ending September 30, 2021, represents a 245.5% improvement year-over-year. Its  consensus revenue estimate of $683.64 million for the next quarter, represents a 28.3% rise from the prior-year period.

NEXA ended yesterday’s trading session at $11.73, surging 153.4% over the past year. During the past nine months, the stock has plunged 63.4%.

NEXA’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our POWR Ratings system.

NEXA has an A grade for Momentum, and a B grade for Quality and Growth. In addition to the POWR Ratings grades we’ve just highlighted, one can see NEXA’s ratings for Value, Sentiment and Stability here.

Out of 51 stocks in the Miners – Diversified industry, NEXA is ranked #7.

Sierra Metals Inc. (SMTS)

Headquartered in Toronto, Canada, SMTS engages in the production, exploration, and development of precious and base metals in Peru and Mexico. The company is focused primarily  on exploration for  silver, copper, lead, zinc, and gold deposits. It owns interest in the polymetallic Yauricocha Mine in Peru and in the Bolivar and Cusi Mines in Mexico. It has a market capitalization value of $587.33 million.

In an announcement on April 21, 2021, SMTS said it will invest $28 million, including an initial expenditure of $5.2 million, for the construction of a magnetite processing plant at its Bolivar Mine in Mexico. The plant is expected to produce approximately 500,000 tonnes per year of 62% iron ore concentrated at its Bolivar Mine. This would result in an additional revenue for the company.

For its fiscal year 2021 first quarter, ended March 31, 2021, SMTS’ revenue came in at $69.62 million, which represented an improvement of 25.3% year-over-year. The company’s gross profit increased 158.7% year-over-year to $21.26 million. Its income from operations came in at $12.54 million, which represents an improvement of 9623.3% from the year-ago period. SMTS’ net income came in at $3.76 million for the quarter, compared to a net loss of $1.75 million in the first quarter of 2020. Its EPS is reported at $0.02, compared to a loss per share of $0.01 in the prior-year period.

For the current quarter, ending June 30, 2021, analysts expect SMTS’ EPS to be $0.08, up 948.8% from the prior-year period. Analysts expect the stock’s revenue to be $95.11 million, which represents a 127.2% rise from the prior-year period.

SMTS has gained 342.7% over the past year and 116.1% over the past nine months. It closed yesterday’s trading session at $3.63.

It’s no surprise that SMTS has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has a B grade for Value, Growth, Quality and Momentum. Click here to see the additional ratings for SMTS (Stability and Sentiment).

SMTS is ranked #1 in the Miners – Diversified industry.

MTRN shares were unchanged in after-hours trading Wednesday. Year-to-date, MTRN has gained 19.85%, versus a 10.25% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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