10 Mining Stocks Seen Rising at Least 40%

NEW YORK (TheStreet) -- The 8.2% rise in the Metals & Mining Index has outperformed the S&P 500's 7.2% increase so far in September. Investors could see further upside in the volatile metals and mining sector while the markets have positive momentum.

The following 10 metals and mining stocks are expected to gain at least 40% in the upcoming months, according to analysts' median estimates.

In particular, analysts are bullish on coal as coal companies are set to ride on the wave of industrialization expected in emerging economies over the next decade, and escalating demand from Europe.

"Coal is the only sustainable fuel with the scale to meet the primary energy needs of the world's rising populations and economies," said Peabody Energy ( BTU) CEO Gregory Boyce in a press release. Coal has been the world's fastest-growing fuel over the past decade, outstripping the demand for natural gas and crude oil. The world has trillions of tons of coal reserves, which contribute nearly 60% toward global energy resources. Coal demand is likely to grow by more than 1 billion tons every three years, according to Boyce.

10. Alpha Natural Resources ( ANR) is the third-largest coal producer in the U.S. with a capacity of around 100 million tons of steam and metallurgical coal. The company operates 60 mines and 14 coal-preparation plants in Virginia, Kentucky, Pennsylvania, and Wyoming.

Alpha Natural's balance sheet is strong with a declining net debt position, thereby providing opportunities for the company to develop new mines. At $40.61, the stock is currently trading at an attractive price-to-earnings ratio of 13.33. Of 21 analysts covering the stock, 76% recommend buying it, five suggest holding, and none advise selling the stock.

The ratio of enterprise value to earnings before interest, taxes, depreciation and amortization of the company currently stands at 5.6 in comparison to Peabody's 7.8, Walter Energy's ( WLT) 5.7, Arch Coal's ( ACI) 8.1, and Massey Energy's ( MEE) 8.4.

9. Cliffs Natural Resources ( CLF), an international mining and natural resources company, is the largest producer of iron ore pellets in North America. The stock is down 19% from the peak attained on April 14 despite a recent upsurge.

At $61.11, the stock is currently trading at an attractive price-to-earnings ratio of 7.61. Of 12 analysts covering the stock, 75% recommend buying Cliffs, three suggest holding, and none advise selling the stock. Long-term contracts with companies such as ArcelorMittal ( MT) reduces volatility in Cliffs' revenue in the North American markets.

Citigroup upgraded the company's per-share earnings estimates for 2010 and 2011 on Aug. 30, raising its iron ore forecasts and incorporating the INR Energy purchase. Cliffs announced Tuesday it would invest around $306 million to upgrade iron ore infrastructure at the Koolyanobbing complex in Western Australia.

8. Rio Tinto ( RTP), a global metals and mining giant with operations spanning across more than 50 countries, produces aluminum, copper, diamonds, coal, iron ore, uranium, gold, and industrial minerals.

Higher iron ore (accounting for 28% of Rio's revenue) prices, will continue to boost the company's underlying earnings. For the first half of 2010, net earnings grew 125%.

On Wednesday, HSBC advised investors to switch out of BHP Billiton ( BHP) on the potential of superior returns. By the first half of 2011, the bank sees Rio, compared to BHP, holding surplus cash for acquisitions.

Analysts following Rio recommend buying the stock. At $56.81, the stock is currently trading at an attractive price-to-earnings ratio of 7.92. In comparison, mining giants BHP Billiton and Vale ( VALE) are trading at P/E ratios of 14.10 and 10.02, respectively.

7. International Coal Group ( ICO), a leading producer of coal in Northern and Central Appalachia and the Illinois Basin, controls around 1 billion tons of high quality coal, which is high BTU, low-sulfur steam, and metallurgical quality coal.

The stock gained around 40% early July, but continues 9% off from its 52-week highs. Similar to Alpha Natural Resources, the company's EV to EBITDA ratio of 5.8 falls below the industry average. Of the seven analysts evaluating the stock, five recommend buying International Coal, two suggest holding and none advise selling the stock.

6. Horsehead Holding ( ZINC) is the largest zinc producer in the U.S. and a leading manufacturer of value-added zinc products.

The acquisition of Inmetco on the last day of 2009 is accretive for the company. Horsehead reduced its exposure to zinc, added some revenue stability, and paved the way for joint ventures with stainless steel producers in Asia.

Currently, the stock has three buy, three hold, and no sell ratings, according to analysts polled by Bloomberg. Although the stock is trading 36.6% below its 52-week highs seen in January 2010, it is trading at a higher P/E ratio of 25.3.

5. Consol Energy ( CNX) is the largest producer of high-BTU coal in the U.S. and a leader in coalbed methane gas production. The company has around 4.5 billion tons of proven and potential coal reserves, the second largest among U.S. coal producers. Consol has been active in expanding its natural gas assets and completed the acquisition of Appalachian natural gas assets in April and CNX Gas in early June.

Of the 24 analysts covering the stock, 58% recommend buying it, nine suggest holding, and one advises selling the stock. At $35.40, the stock is trading just 14% above its 52-week lows.

4. Platinum Group Metals ( PLG) is a platinum metals exploration and development company focusing primarily on operations in South Africa and Canada. The stock is set to see an upside on the growing deficit for PGMs .

During the final week of August, analysts at Raymond James upgraded the stock to strong buy from outperform. All four analysts following Platinum Group Metals recommend buying the stock. In comparison, peers Stillwater Mining ( SWC) and North American Palladium ( PAL) have buy recommendations of 67% and 88%, respectively.

3. Patriot Coal ( PCX) is a leading producer and marketer of coal in the Eastern U.S., with 14 mining complexes in Appalachia and the Illinois Basin. The company controls around 1.8 billion tons of proven and potential coal reserves.

Patriot Coal downgraded its sale estimates volume in the range of 7.5 to 7.7 million tons, down around 10% from the earlier estimates. Lower volume is attributable to the downtime at the Federal and Panther Longwall operations and difficult geological conditions during the quarter. Following its Sept. 10 announcement, the stock declined around 8.5% to date. More recently, the company added capacity at its Black Oak mine.

Currently, the stock has two buy, eleven hold, and two sell ratings, according to analysts polled by Bloomberg.

2. James River Coal ( JRCC) mines and sells bituminous, steam and industrial coal through six subsidiaries located in Eastern Kentucky and Southern Indiana.

At $16.27, the stock is trading at an attractive price-to-earnings ratio of 5.99. In comparison, Peabody, Arch Coal, and Cloud Peak Energy ( CLD) are trading at P/E ratios of 15.6, 22.4, and 10.8, respectively. Of the 10 analysts covering the stock, 70% recommend buying it, three suggest holding and none advise selling the stock.

1. Metalico ( MEA) is a ferrous and non-ferrous scrap metal processor and the largest fabricator of lead-based products. Lead-based products cater to a diverse industrial customer base, while the highly cyclical nature of the scrap metal industry influences the company's sales.

The stock is down 47% from the recent highs attained on April 29. At $3.49, the stock is trading at an attractive price-to-earnings ratio of 9.8. Of the four analysts covering the stock, three recommend buying it, one suggests holding, while none advises selling the stock.

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