The company experienced a 35% decline in its earnings during fiscal year 2012, predominantly due to forced write-downs on account of falling prices of shale-gas and nickel assets. A highly challenging global economic outlook and weaker growth in key emerging markets made matters worse.
However, once the macroeconomic environment improves and growth picks up, BHP Billiton Limited (ADR) (NYSE:BHP) has placed itself in an ideal position to reap benefits. The company made several strategic acquisitions in U.S. to extract shale gas and oil from the Texas region. This is potentially a game changer not just for BHP but for the entire U.S. industry. At present, the U.S. is making considerable efforts to bolster its production levels in order to meet the domestic demand and turn its status to the global net exporter of crude oil.
While Pan American is only interested in gold, silver and copper production, BHP Billiton Limited (ADR) (NYSE:BHP), with its diversified portfolio, large resource pool and global presence, is a far more complete company. As global growth picks up, this is one stock that is certain to outperform its peers.
Compania de Minas Buenaventura SA (ADR) (NYSE:BVN) is another competitor to Pan American Silver Corp. (USA) (NASDAQ:PAAS), and the largest mining company in Peru. The first quarter of 2013 was extremely disappointing for the company with 51% year-over-year fall in earnings. The slump was primarily due to a decline in global demand coupled with lower contributions from its equity stakes in Newmont Mining and Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX). The lower contribution from its equity stakes is attributed to low prices of gold and silver.
Additionally, considering the constantly rising demand for special economic benefits for workers in its Uchucchacua mine, the company is facing increasing trouble with labor strikes.
With a global economic recovery in sight and demand from China and other emerging economies set to rise, I believe the industry will fare well in the long run.
However, factors such as constantly rising protests on the account of environmental degradation and countries preferring to keep ownership of their natural assets could marginally hinder expected growth. I believe Pan American Silver Corp. (USA) (NASDAQ:PAAS) will report even better numbers post 2014, therefore, I suggest investors hold onto its stock and have a long-term horizon.
The article Is There a Silver Lining for This Mining Company? originally appeared on Fool.com and is written by Kiran Gulati.
Kiran Gulati has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Kiran is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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