I'll take a stab at this question and offer a disclosure: I recently got in RING (5.1), NEM (16.4), ASX:RIO (46.3), and FCX (8.2). While I won't add to my positions at current prices, I may add other positions, or more to them if they fall further. This is called
catching a falling dagger and it's a high risk move.
Cons (let's scare everyone away)
- The commodity beating probably hasn't ended and these could fall another 50+%.
- With central banks tightening, most expect that commodities will suffer more (hold this thought, though).
- It looks like 2016 will be a recession for many countries, possibly the US. This will continue to negatively impact mining.
- For most people, you should stick to index funds, as mining assessment usually involves some blue collar understanding of what assets become valuable in what times.
- There was too much debt in mining in the past, and it's getting flushed out. This isn't a short process.
The ECB didn't engage in as much QE as the market hoped and look at how it reacted, especially commodities. Consider that the ECB's actions were "tighter" than expected and the Fed plans to raise rates, or claims so. Commodities should be falling off a cliff on that news.
While most American/Western attention is on the latest news or entertainment, China has been seizing commodities around the globe like crazy, and the media have failed to mention that even with its market failing, China is still seizing commodities. If China was truly panicked about its market, it would stop investing in other countries and commodities and just bail out its own country. Yet, it's not doing that. The whole "China crisis" is completely oversold in the West; China is saying one thing ("oh no"), but doing another (using its money to snap up cheap commodities).
Capitalism works because hard times strengthen good companies. You know how many bailouts ExxonMobil has received compared to Goldman Sachs? You know who owns more real wealth? Oil doesn't get bailed out, banks do, and banks can't innovate to save their lives, while oil innovates. Hard times strengthen good companies. This means that this harsh bust in commodities will separate the winners from the losers and history shows the winners do very well in the long run.
Related to the above point: how many bailouts from tax payers do you think mining companies will get? Zero. At least you're investing in companies that don't steal your money through government confiscation.
If you're like me, you can probably find at least 9 people out of 10 who think "investing in miners is a VERY BAD idea." What do they think is a good idea? "Duh, Snapchat and Twitter, bruh!" Then there's the old saying, "Be greedy when everyone's fearful and fearful when everyone's greedy."
Finally, miners own hard assets. Benjamin Graham used to point this out with the "dead company" strategy like finding a used cigarette with one more smoke. You're getting assets cheap, while other investors are overpaying for stocks, hoping that the Fed unleashes
moar QE! Think strategy here: seize cheap assets, begin limiting the supply of these assets (if you're the saver and not borrowing), then watch as the price begins to rise for them because of low supply. Remember, investors are part owners in companies - take more control to limit the supply. Using Graham's analogy, stock pile those one-puff cigarettes for a day when there's a low supply of cigarettes.
Many miners are in trouble now because they've borrowed too much and must sell at a low profit, or in some cases, must lose. When you own assets debt free, you can cut the supply. This will also help the Federal Reserve, who's been desperately trying to figure out how to raise inflation. The new patriotic thing to do is stimulate the economy by sending inflation up, and limiting the supply here is key.