Can mining stocks deliver golden gains?

Investing in mining stocks is one of many approaches to boost your portfolio’s exposure to gold and other precious and industrial metals.

Shares in miners – companies that dig commodities like gold, silver or rare earth materials out of the ground – are becoming increasingly popular investments. FTSE 100 mining giants Glencore (LON:GLEN) and Fresnillo (LON:FRES) were the second and third most popular stocks among Interactive Investor’s users during January, coinciding with an eye-catching month for the price of gold and silver.

There are three ways of tapping into changes in commodity prices.

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You can buy the physical commodity (such as a gold bar) or a physically-backed product like an exchange-traded commodity (ETC, which is similar to an exchange-traded fund or ETF). This approach gives you direct exposure to changes in commodity prices.

Or you can invest in futures contracts. These rise in value when markets expect commodity prices to rise in future. But they are time-limited, and rolling over these contracts beyond their term (usually 3-12 months) incurs additional costs.

The third approach is to buy shares in mining companies. While these come with their own risks, they often lead to greater returns than you’d get simply by investing in the physical commodity.

“A gold bar will perform like the price of gold,” says Evy Hambro, portfolio manager at BlackRock World Mining Trust (LON:BRWM). “Whereas with gold [mining] companies, you’ve got a bit more volatility, but you’ve got the chance of fantastic returns through dividends, M&A, exploration success and production growth.”

How does investing in mining stocks work?

Mining stocks are shares in the businesses that take commodities out of the ground.

Very simply, the profit a mining company makes is the value of the commodity they sell minus the cost of producing it. Owning their shares entitles you to some of those profits.

Mining stocks come with risks both positive and negative compared to physical commodities, says Hambro. “On the negative side, you could have an operational issue. The mine could flood, or there could be strikes,” he says. There is also the risk that their operating costs could increase because of price rises in their inputs, such as a spike in the oil price. And while physical gold just sits there getting more or less valuable as the price changes, a mining company’s performance is subject to the decision-making skill of its management team, which can vary.

But mining stocks could benefit from all sorts of tailwinds; a mine’s life could be extended by new discoveries, or an acquisition by a competitor could suddenly boost the share price. And unlike physical gold (or silver, copper, or any other commodity), mining stocks can and do pay income in the form of dividends.

How do commodity prices affect mining stocks?

Rising commodity prices can dramatically increase the profits that mining companies can make, assuming their underlying costs stay relatively constant.

On 5 February, Barrick Mining (NYSE:B), one of the world’s largest gold mining companies, announced a 79% increase in adjusted earnings per share to $1.04 in Q4 2025. Management increased its quarterly dividend by more than 140% over the previous quarter.

In the 12 months to 11 February, Barrick’s share price increased by 210%. Shares in Fresnillo increased 390% over the same period; but the spot price of physical gold gained a relatively modest 75% (silver, which Fresnillo also mines lots of, gained 162%).

This is a roundabout way of saying that mining stocks are more volatile (and as such, riskier) investments than physical commodities, but the additional risk can be compensated by far greater rewards when things go well.

Can commodity prices keep rising?

Mining stocks have benefitted from a dramatic rise in precious and industrial metals prices over the last year. As ever within investing, this prompts concerns over whether prices can continue to rise.

Hambro believes that the volatility seen in precious metals prices through late January and early February 2026 reflects a pattern of metals prices stabilising at a higher level following a period of rapid gains.

“[Metals prices] have gone up a lot, and some people think they might come down… there is caution about such a big rise,” he said. “People might want to take some profits.

“But as time goes on, and the prices don’t retreat, people become more comfortable with that price range. They will start to reflect that price range in their assumptions.” That eventually leads to further buying of metals and related assets, as buyers start to move back into the market.

What are mining royalties?

One interesting aspect of mining stocks compared to other equities is their potential to return capital through royalties, rather than dividends.

Dividends are paid out of equity, which is accumulated through profits – that is, at the bottom of the balance sheet. But royalties are payments made as a percentage of a mining company’s top line.

Accessing mining royalties usually requires a substantial investment into a mining company at the start of its project. For that reason, they are fairly inaccessible for most retail investors, but they entitle the investor to a percentage of sales from the mine for the duration of its operations.

This offers two main advantages: firstly, you’re paid out of sales, not profits. If the miner’s costs go up, you still get paid the same percentage of sales – as opposed to equity and dividends, which only come about after all operating expenses and taxes have been paid.

Secondly, if the life of the mine is extended, the length of time that you will receive royalty payments is increased, without any extra cost.

While it isn’t straightforward for most individual investors to access royalties, some investment trusts, like BlackRock World Mining Trust, own royalties contracts.

How to invest in mining stocks

The most basic way to invest in mining stocks is to buy the shares directly, which you’ll be able to do through most brokers. But because of the specific risks involved in mining stocks compared to physical commodities, it can make sense to diversify your exposure rather than putting your entire commodities allocation into a particular miner.

There are some funds that are focused on mining stocks, such as SVS Baker Steel Gold and Precious Metals Fund or Jupiter Gold and Silver Fund.

There are countless ETFs focused on mining stocks, including the WisdomTree Strategic Metals and Rare Earths Miners UCITS ETF (LON:WREE), which holds companies involved in producing the rare earths and other key materials used in the energy transition; the HANetf ICAV Sprott Copper Miners ESG Screened UCITS ETF (LON:COPP), which primarily holds copper mining stocks; or L&G Gold Mining UCITS ETF (LON:AUCP) which focuses on gold miners.

Or, besides BlackRock World Mining, there are investment trusts such as Golden Prospect Precious Metals (LON:GPM) and CQS Natural Resources (LON:CYN); both have the same management, but Golden Prospect focuses primarily on precious metals miners while CQS Natural Resources is more diversified across both precious and industrial metals (and includes some exposure to non-mined commodities like oil and gas).