The rising demand for minerals and precious metals amid the resumption of manufacturing and industrial activities has been pushing mining companies to expand their production capacity. This, combined with investors’ interest in precious metals as a store of value in the face of rising inflation, suggests bright prospects for the mining industry. So, small-cap mining stocks Materion (NYSE:MTRN), Nexa (NEXA), and Sierra Metals (NYSE:SMTS) are expected to generate robust returns in the near term.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.