Dig into Metal and Mining ETFs

The rise in the US dollar has caused pain across number of commodities. Not surprisingly this has hurt oil and gold as well as commodity heavy export countries. The fall in the most commonly used metals such as copper, zinc and iron ore has created value in the sector for investors with a long investment horizon.

As Miner ETFs are commonly weighted by market capitalization only those miners with strong balance sheet and with lowest cost producing assets left.

The survivor bias favour current investors looking at Metals and Mining ETFs as only mining stocks that are able to withstand the fallout and take market share from their weaker competitors are left.

Mining ETF List Ticker
SPDR S&P Metals & Mining ETF XME
iShares MSCI Global Metals & Mining Producers ETF PICK
Global X Junior Miners ETF JUNR
iShares S&P/TSX Global Base Metals Index ETF (TSX Only) XBM
Global X Uranium ETF URA


Metal and Mining Exchange Traded Fund (Stocks)

SPDR S&P Metals & Mining ETF (XME) is the most commonly known mining ETF. It tracks the S&P Metals and Mining Select Industry Index which includes 36 largest US listed miners.

Analysis of XME ETF shows that it is weighted heavily towards Steel and Coal stocks with diversified mining coming in as the 3rd largest component of stocks in the fund. The metal and mining companies in the ETF can be considered mid cap stocks with average market capitalization of around $3 billion.

Miner ETF Exposure

Diversified Position


iShares MSCI Global Metals & Mining Producers ETF (PICK) is our preferred ETF mining exposure. Companies in XME are purely US listed miners. It is important to note some of the largest listed diversified miners in the world like BHP Billiton, Rio Tinto, Glencore and Anglo American are not listed in US but in UK, Australia and Canada.

These are the historically preferred listing markets for global mining companies and the 5 largest companies in PICK account for more than 35% of the fund. Some consider these the best mining companies in the world. Aside from exposure to the best miners in the industry, the metals ETF also invests across more than 200 stocks in the fund.

Global Miner Country Weight (PICK)

At first the idea of investing in a global mining and metals ETF can be seen to be risky. However from reviewing the country allocation of PICK. The 5 largest country allocations at more than 65% of the fund AUM are all in developed markets. Due to heavy weight to BHP and RIO which has consistent and strong dividend payout ratios, the dividend yield of the fund is actually higher than the broader market.

iShares S&P/TSX Global Base Metals Index ETF (XBM) is the Canadian version listed on the Toronto Stock Exchange. It tracks iShares S&P/TSX Global Base Metals Index ETF (TSX Only) and is priced in CAD. It has slight variation to XME where some of the Australian stocks like BHP are replaced with the ADR of the same stocks. Investors should note that there is an extra slight layer of fees as result of this.

The more adventurous investors that are looking for junior metals and miners can use the Global X Junior Miners ETF (JUNR). JUNR tracks Solactive Global Junior Miners Total Return Index. Unlike the gold leverage ETF options there are also no leveraged ETF for metal and miners.

 

Specialist Miner and Metal ETFs

Global X Uranium ETF (URA) is an Uranium ETF. URA invests in miners that are majoritively focused on the Uranium industry. It has around 26 holdings however the overall trend of URA would be inline with the broader uranium sector. Not surprisingly it is dominated by Canadian Uranium stocks (50%) followed by US (30%) and Australia (16%), Cameco Corporation account for 23% of the exchange traded fund.

Metal and Mining Exchange Traded Fund (Commodities)

Unlike the Mining ETFs above, the Metal ETFs below do not invest in miners that extract and process the ores into metal. Rather these ETFs enable investors to gain direct exposure to movements in the prices of the metals. One should note that as a result, these funds invests in metal futures or holds physical metals which do not pay any income.

Metal ETF List Ticker
PowerShares DB Base Metals Fund DBB
ELEMENTS Rogers International Commodity Index RJZ
iPath Dow Jones-UBS Industrial Metals Subindex JJM
iPath Dow Jones – AIG Copper Total Return Sub-Index ETN Series A JJC

 


Metal Portfolio ETF

PowerShares DB Base Metals Fund (DBB) is a commodity fund that invests in Aluminium, Copper and Zinc in equal parts (33% each). Unlike DBB, iPath Dow Jones-UBS Industrial Metals Subindex Total Return ETN (JJM) has the same 3 commodity exposure but at different weights.

Commodity %
Copper 42.44%
Aluminum 29.79%
Zinc 14.92%
Nickel 12.86%

 

For direct exposure to copper. iPath Exchange Traded Notes Dow Jones – AIG Copper Total Return Sub-Index ETN Series A (JCC) is one of the most liquid copper ETF.

ELEMENTS Exchange Traded Notes Rogers International Commodity Index (RJZ) is a more diversified metals ETF. It invests across 10 different commodities which allows investors to gain exposure to the broader trend rather than picking specific base or precious metal exposure.

Metal ETF Holdings

In RJZ, gold is still the largest exposure at 20% of the fund. Combined with Silver, precious metal exposure is close to 36%. Remaining amount in the fund is spread across other base metals.

Below are more listed Metal ETFs. However investors should note that some may have limited liquidities so one should take care and understand the liquidity for these ETFs before buying.

Metal Fund Ticker Commodity
UBS E-TRACS CMCI Industrial Metals Total Return ETN UBM Industrial Metal
PowerShares DB Base Metals Long ETN BDG Base Metal
iPath Dow Jones-AIG Aluminum Total Return Sub-Index ETN JJU Aluminum
United States Copper Index CPER Copper
United States Metals Index Fund USMI Diversified
iPath Dow Jones-UBS Nickel Subindex Total Return ETN JJN Nickel
RBS Rogers Enhanced Industrial Metals ETN RGRI Industrial Metal
iPath Pure Beta Nickel NINI Nickel
iPath Pure Beta Aluminum FOIL Aluminum
iPath Pure Beta Industrial Metals HEVY Industrial Metals
iPath Pure Beta Lead LEDD Lead
iPath Pure Beta Copper CUPM Copper
iPath Dow Jones-AIG Tin Total Return Sub-Index ETN JJT Tin
iPath Dow Jones-AIG Lead Total Return Sub-Index ETN LD Lead