They also tend to offer goods or services that people continue to buy, even when the economy isn’t doing well. Branded goods are an example of this. But there are other examples, such as water, healthcare and even gold.

And as the UK economy gets weaker, I’m also looking at companies that will benefit from the weakness of the pound.

Smith & Nephew

There’s no doubt the last couple of years have been difficult for medical device manufacturer Smith & Nephew (LSE:SN). And its current share price reflects that. Peers in the industry have also endured a tough time as Covid-19 put many elective operations on hold.

But, finally, things are looking up for Smith & Nephew. There’s a considerable backlog of elective procedure in the UK, and there’s political determination to bring these numbers down.

The stock is currently trading at a discount versus pre-pandemic levels — almost trading for half its near-£20 highs three year ago. Costs are the new concern for investors, with inflation eating into margins.

However, I think Smith & Nephew has the capacity to pass these costs onto its customers. After all, they are necessities. And 2022 isn’t progressing as badly as the share price would suggest. Q1 saw expectations beaten, while Q2 saw continued growth. The company also left its full-year underlying revenue growth guidance unchanged at between 4% and 5%.

The firm also operates in 100 countries and that international customer base should be beneficial as the pound weakens.

I already own Smith & Nephew stock, but would buy more today.

Antofagasta

The Antofagasta (LSE:ANTO) share price has fallen considerably in recent months as copper prices tanked. This metal is the miner’s main product. It’s down considerably this year, but it is worth noting it’s still trading at prices way above the average for the past decade.

So why do I think a copper miner has defensive qualities? It’s not a conventional one for sure, but it’s the metal of electrification, and electrification is at the heart of the global energy transition.

It’s not just electric vehicles requiring more copper than combustion engine vehicles, it’s also an integral part of electric grid infrastructure. So copper demand is forecast to nearly double to 50m metric tons by 2035. 

As such, I believe the metal could be more resilient than most people think. Supply has been struggling to keep up with demand for years. And it’s also worth noting that government-backed infrastructure projects are normally used as a way to pull economies out of recession. So this could boost copper demand even further.

I’m also backing Antofagasta as it makes most of its revenue in dollars. Around 25% of revenue comes from Japan, while 17% is from China, and another 17% comes from Switzerland. The UK only accounts for 1%. So this should be good for a pound-denominated stock.

I don’t have shares in Antofagasta, but I’m looking to buy this stock for my portfolio.

Consistent profits

First, Antofagasta’s (LSE:ANTO) share price has been volatile in recent months. In the past three months, it’s down 21% and currently trades at 1,167p.

The Chile-based copper mining firm has been consistently profitable over the last five years, registering a pre-tax profit of $3.4bn for 2021.

It’s important to note, though, that this growth is not guaranteed in the future.

Furthermore, with its results for the six months to 30 June, the company reiterated its production guidance for 2022 of between 640,000 and 660,000 tonnes of copper. 

However, during this period revenue fell by around 30% to $2.5bn. In addition, core earnings declined by about 50% to $1.2bn.

Much of the fall can be attributed to a drop in the copper price, in line with other commodities. Also, a drought in Chile has negatively impacted mining operations as water is essential for these. 

It’s opening a desalination plant in the second half of this year, and this should greatly help the business to pick up production. 

In the long run, demand for copper could increase significantly because it’s an essential component in many products, including electric vehicles.

Banking on higher interest rates

Second, shares in Standard Chartered (LSE:STAN) are down about 6.25% in the last three months. At the time of writing, they’re trading at 588p.

The banking firm has been benefiting from rising interest rates. These are currently set at 1.75% in the UK. With inflation above 10%, it’s very likely that interest rates will move higher.

This is generally good news for the likes of Standard Chartered because it may be able to charge more for borrowing services. 

But it’s also worth noting that higher rates could be negative. With the cost-of-living crisis, potential customers may be put off taking on debt at more expensive levels. 

In its results for the six months to 30 June, however, the business reported that pre-tax profit was up 7% to $2.8bn. 

Furthermore, it announced that it’s embarking on a $500m share buyback scheme. It’s also paying an interim dividend of ¢4 per share. While this company may provide growth, it’s good to know that I could possibly derive income from the investment too.

Overall, these businesses may provide good opportunities if bought next month. While they face challenges, they’re both profitable and stable. To that end, I’ll add both firms to my portfolio next month and hold them for the long term. 

This guide will describe what copper mining stocks are, the pros and cons of investing in the copper industry, and which are the UK’s top copper stocks to invest in.

What are copper stocks?

A copper stock is a mining company in the materials sector that generates either all or a large proportion of its earnings from getting physical copper out of the ground.

The world’s largest copper companies participate in all stages of the process. They’re responsible for:

• Exploration and drilling activities to find copper resources
• Developing copper mines if they deem a resource to be commercially viable
• Building the related infrastructure
• Producing the metal in massive quantities

Colossal amounts of copper are used every year. In fact, copper is the third-most consumed metal on the planet (behind iron ore and aluminium). This is because of its exceptional versatility and its consequent use in a wide range of applications.

Copper has extensive uses in a variety of industries including construction, transportation, utilities, machinery, and consumer electronics. As a result, it’s known as a bellwether metal — it can be used to measure the health of the global economy. This is why copper is often referred to as ‘Doctor Copper.’

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Top copper stocks in the UK

Here are some of the largest copper producers on the London Stock Exchange today (by market capitalisation).

Glencore

Glencore is a multinational commodities company that produces raw materials and markets commodities to consumers. It has considerable exposure to the copper market and in 2021 produced more copper than any other UK copper company.

Glencore has interests in copper assets that span the globe. It has mines, smelters, and refineries in Chile, Peru, Canada, Australia, the Democratic Republic of Congo, and The Philippines. 

In total, the FTSE 100 business generated 37% of adjusted earnings from these copper projects in 2021, meaning it makes more money from copper than from any other single commodity.

Despite this, Glencore’s total copper output slipped 5% in 2021 to 1.2m tonnes. Selling its stake in the Mopani project in Zambia caused most of the decline.

However, this was still enough to put the copper stock in third place on the list of the world’s biggest red metal producers. Glencore also devoted around $1.92bn on capital expenditure at its copper business in 2021. This was $422m more than it spent a year earlier.

Glencore salvages scrap copper through its recycling division too. And it fulfils the role of ‘middleman’ between copper producers and consumers through its marketing unit.

Antofagasta

Antofagasta is the UK’s largest dedicated copper mining company and, like Glencore, trades on the FTSE 100. Due to lower grades and water supply issues, output here slipped 2% year-on-year in 2021 to 721,500 tonnes.

Antofagasta has sizeable stakes in four copper producing assets in Chile, the world’s largest copper-producing country. These include the sizeable Los Pelambres and Centinela projects which collectively account for 90% of group output.

Antofagasta is investing heavily to boost copper production and mine life at Los Pelambres and to increase output at Centinela. The copper stock is also undertaking exploration activity in Chile, Peru, Canada, and the United States.

Central Asia Metals

Central Asia Metals is a base metals miner that in 2021 generated three-quarters of EBITDA from its Kounrad copper asset in Kazakhstan. The remainder came from its Sasa mine in North Macedonia, where it produces lead, zinc, and silver.

Central Asia Metals has been pulling copper out of Kounrad for the last decade, an asset whose mine life stretches out to 2034. The Kazakh resource may hold 126,000 tonnes of recoverable copper.

Total production at Central Asia Metals rose 1% year-on-year in 2021 to 14,041 tonnes. Central Asia Metals has expanded the Kounrad mine twice, and is now focussing capital expenditure on the Sasa lead-zinc project. 

Are copper mining companies sensitive to the economy?

Copper is an extremely economically sensitive metal, so prices can move up and down wildly according to broader industrial conditions. As a result, copper mining companies’ profits (and share prices) are also highly geared towards the broader macroeconomic landscape.

However, earnings of copper stocks aren’t just affected by the health of the global economy. Classic supply and demand conditions also influence commodity prices. So even if copper consumption is rising as economic conditions improve, the copper price might not shoot up. A glut of new supply or expectations of rising global production could keep prices subdued.

Conversely, we could see higher copper prices even during periods of no or low economic growth if, say, copper production in key mines or regions (such as in Chile following a fresh labour dispute) comes under pressure.

Is copper a good investment?

With the way the demand for copper is increasing based on the world’s lean towards going green, copper producers could be a great investment for UK investors. Based on current ecological policies, the International Energy Agency thinks annual copper consumption will rise from 24m tonnes in 2020 to 28.6m tonnes in 2030.

Copper stocks are popular investments for investors who are looking to make money from rising demand for electric vehicles (EVs). Due to the metal’s excellent electrical conductivity, it is an essential material in building the vehicles themselves as well as charging infrastructure.

Copper consumption is also tipped to rocket as investment in renewable energy increases and the rate of emerging market urbanisation grows. 

Some analysts even believe that copper supply could fail to keep up with rapid demand increases. Researchers at Rystad Energy, for example, think a market deficit of 6m tonnes will emerge by the end of the decade.

However, copper stocks that manage to overcome these problems could stand to profit significantly over the next decade as copper shortages drive up prices.

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Copper production in 2021 was 721,000 metric tons (MT), about 3% of the world total. The forecast for 2022 is lower, 640-660,000 MT, due to a fractured concentrate pipeline at its Les Pelambres mine and a water shortage resulting from a drought in Chile.

The first half of 2022 was challenging for Antofagasta. Also, the copper price was volatile due to world macro developments.

Nevertheless, while the short-term outlook remains uncertain, because of global economics (inflation) and geopolitics, I believe the medium- to long-term outlook for copper, and therefore Antofagasta, is very promising. 

As countries make the transition to low-carbon economies, copper is a critical metal for renewable clean power generation and electric vehicles (EV)s. On 15 November 2021, President Biden signed a massive infrastructure bill of $226bn for projects requiring large amounts of copper.

The dominance of internal combustion engine vehicles on our roads is fading fast. In 2021 global electric vehicle sales totalled 6.6 million, 9% of the global market, double 2020’s volume. Great news regarding decarbonisation, but there is a looming copper shortage due to the ever-increasing EV demand and the concomitant green energy transition.

Future demand

The 2050 net zero climate objective will not be achieved without a major increase in copper production. An EV requires 2.5 times more copper than a conventional vehicle. However, insufficient new mines and mine expansions are being developed to meet this and the copper demand for new green energy power stations and their transmission lines.

A chronic gap between worldwide copper supply and demand is projected, beginning in 2025. It is forecast to be as much 1.5 million MT by 2035 even if annual copper production nearly doubles by then to 47 million MT, from 24.5 million MT in 2022. Recycling of scrapped EVs will be insufficient to fill the gap. Thus, copper could become a major national energy security concern.

Medium to long term the price of copper, while volatile, can only go one way in my opinion: up. Consequently, it makes sense for me to hold copper stocks, such as Antofagasta, in a balanced share portfolio.

At the time of writing, its share price was £11.35. Antofagasta had a market cap of £10.72bn and a price-to-earnings ratio of 14.6:1 (TTM). For 2021 gross revenue was US$7.47bn with an EBITA (earnings before interest, taxes, depreciation and amortization) of US$4.84bn. Profit before tax was US$3.48bn.

The price of copper peaked, at US5.01c/lb in March 2022, as did the Antofagasta share price at £17.99. By July they had fallen, to US3.19c/lb (-26.7%) and £9.71 (-36.9%) respectively. Since then, they have recovered to US3.67c/lb (+15.0%) and £11.35 (+16.9%).

I believe now is a good time for me to buy shares in Antofagasta.

Aviva

Insurance giant Aviva (LSE: AV) gave us a pleasant surprise with the release of first-half results. The previously troubled company has been undergoing restructuring over the past few years. And under the guidance of CEO Amanda Blanc, it seems to be going well.

The share price chart looks a bit confusing with an apparent sharp dip in May. But that was just down to a share reorganisation as part of the company’s return of capital to shareholders.

The big rise in response to the latest update is real though. The Aviva share price jumped 12% on the day. The big news was a 40% rise in the interim dividend, and plans for a new share buyback at full-year results time.

Aviva looks a good bit leaner and more efficient than it used to. And the turnaround is progressing a bit faster than I expected when I bought some shares.

There’s still risk though. Aviva recorded an IFRS loss after tax of £633m, and I’ll keep an eye on that for sure. And we can only guess at what the economy is going to do to the insurance sector.

Antofagasta

Antofagasta (LSE: ANTO) is one of the world’s biggest copper miners. And its first-half results this week reflected a key sector change.

Antofagasta slashed its interim dividend by 61%. Investors received 23.6 cents per share last year. This time it’s just 9.2 cents.

It’s not the first in the sector to do this. In July, Rio Tinto cut its first-half ordinary dividend by 29%. And the big special dividend it paid last year wasn’t repeated.

Antofagasta seems to be doing fine though. And it’s just responding to the cyclical nature of commodities market. The firm pays out 35% of earnings as dividends. And earnings are lower this half due to reduced world demand. The economy in China is suffering under its zero-Covid policy, for example.

We should expect erratic dividends from the sector. And this update reminds us to be wary of “Miners offering double-digit dividend yields” headlines.

Just Group

Just Group (LSE: JUST) also gave us interim figures this week. The company provides retirement management services. It offers insurance, pension plans and things like that. And I reckon it could be a handy barometer of how long-term financial sentiment is going.

After a sharp fall earlier in the year, the Just Group share price has been picking up strongly since the middle of July. For the first half of 2022, the company recorded a 15% increase in underlying operating profit. Retirement income sales were down 3% though. But one thing points to a strong long-term outlook to me.

Just has a record pipeline of over £5bn, which it says means it should exceed growth targets this year. There’s big demand for Defined Benefits products too, which suggests people are seriously planning for their old age.

Copper mining

As a quick introduction, Antofagasta is one of the largest copper mining businesses in the world. Based in Chile, it has three main assets in the country and splits its business into three segments which are mining, transport, and water.

So what’s happening with Antofagasta shares currently? Well, as I write, they’re trading for 1,176p. At this time last year, the stock was trading for 1,413p, which equates to a 16% drop over a 12-month period.

The best shares to buy have risks too

It is a well-known fact that commodities are volatile, as is the market as a whole. Price and demand are often intrinsically linked to the state of the world economy. Uncertainty can cause demand and price to fluctuate. Furthermore, the price of commodities can have a material impact on investor sentiment, performance, and any returns too. This is something I must be wary of regarding Antofagasta shares.

Next, Antofagasta shares look a great option to boost my passive income stream but it is worth noting that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. This often happens to help conserve cash in times of uncertainty or in the face of extreme events such as a pandemic for example.

The bull case

So to the positives then. Firstly, Antofagasta’s position in the copper mining market as well as the current demand for copper are positives. Demand for metal is climbing and it is a key component in building as well as many other applications throughout the world in a multitude of industries. As one of the largest companies in this sector, Antofagasta should benefit and see a boost in its performance and returns.

So let’s take a look at some fundamentals then. I am buoyed by Antofagasta’s track record of performance, although I am aware that past performance is not a guarantee of the future. Looking back, I can see that it has grown revenue and gross profit for the past four years in a row.

Next, Antofagasta shares’ current dividend yield stands at a very enticing 10%. This is substantially higher than the FTSE 100 average of 3%-4%. Furthermore, the shares look great value for money on a price-to-earnings ratio of just 10. The general rule of thumb is that shares that trade on a ratio of below 15 could represent good value for money.

Overall, I believe Antofagasta is one of the best shares I could buy to boost returns through dividend payments. I would add the shares to my holdings to do just that.

What are mining stocks?

Mining stocks are businesses that look for and then pull raw materials from the ground. They can concentrate on all stages of a project’s life cycle, from exploration and mine development to producing the commodities. Or they can concentrate on one part of the process (such as junior miners that may focus solely on finding mineral deposits).

Additionally, mining shares can concentrate on producing just one type of commodity (like gold stocks). Or they can focus on digging for a variety of resources. The table below gives a broad explanation of the different types of mining categories and key materials within each one.  

Investing in mining stocks is one way individuals can try to profit when the global economy is expanding. Demand for raw materials largely rises when spending on goods (from houses and food to consumer electronics and cars) improves.

Certain mining shares can also be popular investments when economic conditions deteriorate. For example, gold prices tend to rise when the global economy suffers a shock and inflation rises. In this environment the profits (and share prices) of gold mining shares can move higher.

Mining shares can also allow a person to make money from particular market sectors or industries. 

For example, you might buy electric vehicle stock Tesla to profit from rising demand for low-polluting vehicles. Or you could buy a lithium-producing stock (like US-focused Bradda Head Lithium) that supplies the key commodity needed to produce car batteries.

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Top mining stocks in the UK

Let’s look at three of the biggest mining shares in the UK today. Each of these companies trades on the FTSE 100 index.

Rio Tinto

Rio Tinto is a diversified mining business with operations that span the globe. Its assets range from Oyu Tolgoi — one of the planet’s largest copper deposits located in Mongolia — to more than a dozen iron ore mines in Western Australia and aluminium smelters in Canada.

Rio Tinto owns many of its assets outright, while in others it shares ownership with other miners or governments. The mining company, for example, holds a 30% stake in Escondida, the world’s biggest copper mine. BHP Group owns a controlling 57.5% stake and is operator of the Chilean asset.

Rio Tinto is a giant in the metals mining business, but it produces other raw materials too. These include diamonds, salt, and boron. The company’s wide asset base and exposure to multiple commodities gives it extra strength. Group profits can hold up even if particular mining assets are underperforming or certain commodity prices are weak.

Its broad wingspan also gives Rio Tinto a way to capitalise on multiple fast-growing end markets. Demand for its copper, aluminium, and lithium for instance might surge as electric vehicle sales take off. Meanwhile consumption of its iron ore — a critical ingredient in steelmaking — looks likely to rise as urbanisation rates in emerging markets increase.

Antofagasta

Antofagasta concentrates solely on producing copper from the red-metal-rich soil of Chile. Its assets are located in the north of the country and its showcase asset is the Los Pelambres mine, one of the largest copper deposits in the world. It owns 60% of the project.

Antofagasta’s core operations are centred around copper production, though it also operates the Ferrocarril de Antofagasta a Bolivia (FCAB) division. This supplies rail and truck transport services to miners in Chile’s Antofagasta region.

Anntofagasta is three-quarters through an expansion project at Los Pelambres aimed to boost output from 2023. The plans will raise Antofagasta’s annual group production by 60,000 tonnes for the first 15 years of life and increase throughput at the plant to 190,000 tonnes each year from 175,000 tonnes now.

Bringing mines online and expanding existing assets can be a difficult and costly business. And Antofagasta recently lifted its costs for the development of Los Pelambres again, to $2.2bn from $1.7bn previously. This is because of disruption related to Covid-19 and general inflationary pressures.

Glencore

Like Rio Tinto, Glencore also owns a large collection of mining assets that cover the globe. The firm produces a range of industrial metals like copper, lead, zinc, nickel, and cobalt. It also produces and exports coal.

Glencore isn’t just about digging for physical commodities though. It is also a major marketer of raw materials and plays a vital role in securing them from its global supplier base, then storing and transporting them to the customer.

Glencore sold 3.1m tonnes of copper in 2021, for example. This was equivalent to 12% of total global copper consumption last year (based on International Copper Study Group data). In total the business makes around 20% of adjusted earnings from its marketing activities.

Glencore also operates a recycling business where it gives copper and precious metals a new lease on life. This FTSE 100 company has many layers of diversification, then, by operating across various industries, commodities and regions.

Are mining stocks right for you?

Investing in mining stocks is an alternative to buying a physical commodity itself (like gold coins) or a financial instrument that tracks raw material prices (such as the United States Copper Index Fund).

Mining stocks are a well-liked asset class with individuals who believe a new ‘commodities supercycle’ is under way. Consumption of many raw materials is tipped to soar over the next decade as industries like renewable energy, electric vehicles, and consumer electronics grow strongly, and spending on housing and infrastructure goes through the roof.

Mining stocks are (largely speaking) highly sensitive to wider economic conditions. This means that profits can rise sharply when demand picks up. But conversely these types of equities can sink in value when times get tough, commodities consumption falls, and their profits take a hit.

Investing in a mining stock doesn’t always pay off when the economy grows, however. While demand for certain raw materials might increase, so too might market supply. This can have a significant impact on the prices that mining shares can ask for their product.

The performance of mining stocks can disappoint even if commodity prices increase sharply. Production stoppages can be common in the industry and revenues might suffer significantly as a result. Rising costs are another problem of investing in mining stocks as labour and energy-related expenses can rocket.

Investors have a choice between investing in ‘junior’ or ‘major’ mining companies. As the name suggests, junior mining stock are smaller and tend to have less financial clout than the larger players. This often makes them riskier investments, particularly during economic downturns when revenues can dry up.

The beauty of mining shares is that they can rise in value when commodity prices increase and pay a dividend to their investors. Not all mining companies return cash in this sort of way — mining for raw materials is an exceptionally capital-intensive business — but many UK-listed mining stocks do offer dividends.

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Growth delivery to my portfolio?

Shares in Ocado (LSE:OCDO) have fallen 57% in the past year and they’re down 27% in the last three months. At the time of writing, the shares are trading at 784p.

In its results for the six months to the end of May, the online food retailer stated that it was on track to meet full-year guidance. This was welcome news for shareholders, given the broader challenges posed by economic factors, like rising energy costs.

Despite this, however, revenue for the period fell 4% year-on-year. Meanwhile, the firm posted a pre-tax loss of £211m. This increased from £27.9m for the same period the previous year.

Over a longer timeframe, on the other hand, losses have actually narrowed. For the year ended November 2021, the pre-tax loss was £176m. For the same period in 2019, this figure stood at £214m. This may be some indication that things are going in a positive direction over the long term.

What’s more, for the 12 weeks to the beginning of July, sales rose 0.7%.

With this relatively strong sales performance, I think a monthly investment in the shares could provide me with growth over the long term.

Mining for profits

Antofagasta (LSE:ANTO) enjoyed surging pre-tax profits between 2020 and 2021, increasing from $1.4bn to $3.4bn.

The copper mining firm has seen its share price falling 24% in the past year and by 13.5% in the last month. The shares currently trade at 1,072p.

It’s also likely that the company could benefit from the reopening of major economies, like China. Demand for base metals would inevitably increase in that instance. It’s this type of trend that attracts me to Antofagasta for a monthly investment.

However, the firm lowered its copper production guidance last week. It produced 129,800 tonnes for the three months to 30 June, down 6.5% quarter on quarter. 

This has been largely due to an ongoing drought in Chile that should subside in the coming months.

On the other hand, demand for copper is likely to increase substantially in the years ahead as economies move to reduce carbon emissions. Copper is a key component in many innovative technologies, including electric vehicles.

Overall, both of these businesses have faced challenges in recent times. Despite this, I think the issues are fundamentally short-term in nature. That’s why, taking a long-term view, I think both of these firms can thrive. As such, I’ll be using my £250 every month to buy the shares of each company going forward.  

One of the highest dividend yields

Antofagasta’s (LSE:ANTO) share price has been volatile recently. In the past year, it’s down 21% and it’s fallen 26% in the past month. At the time of writing, the shares are trading at 1,078p.

The main reason that the company catches my eye is its remarkably high dividend yield. In fact, it has one of the highest in the entire FTSE 100.

In 2021, the firm – a copper miner operating in Chile – paid a dividend of $1.43 per share. Currently, this would translate into a dividend yield of 10.4%. This means that if the share price stayed roughly the same, I would be getting over 10% of my initial investment back by the mere fact that I hold stock.

As a potential investor, I find this very attractive. However, I’m also aware that dividend policies can change at any time.

Yet the business also has good prospects moving forward. For instance, it has identified a significant copper presence at the Encierro Project in the mountains of the Andes. 

In addition, a recent analysis of its wholly owned Cachorro Project showed that copper deposits were higher than expected. Previous forecasts had been 142 megatonnes (Mt), which has been revised up to 155Mt. 

Operations at all of the company’s sites, however, may be impacted if any further pandemic variants arise.

Improving economic outlook and strong earnings

These operational and production updates come within the broader economic environment of slowing demand for base metals, like copper. Lockdowns in China have particularly stifled demand for construction materials and other metals used in manufacturing. 

However, investment bank JP Morgan recently stated that it expects a 7% quarter-on-quarter rebound in the Chinese economy in the second half of 2022. It specifically forecast that this could be good news for companies engaged in the mining and production of base metals, as Antofagasta is.

The business also had solid earnings per share (EPS) growth between 2017 and 2021. During this time, EPS rose from ¢76.1 to ¢142.5, resulting in a compound annual EPS growth rate of 13.4%. This is a speedy pace of earnings growth.

In addition, the shares may be cheap at current levels. Using price to earnings (P/E) ratios, I can better understand if a share price is under- or overvalued. Antofagasta has a trailing P/E ratio of 10.23. This is lower than a major competitor, Glencore, which comes in at 14.22. This is an indication that I could be getting a bargain.

Overall, Antofagasta offers the magic combination of competitive dividends and speedy earnings growth. I will be adding it to my portfolio in the coming weeks.

But Persimmon is not the only FTSE 100 share with a double-digit dividend yield. Rio Tinto (LSE: RIO) yields 11.9% at the moment, while fellow miner Antofagasta (LSE: ANTO) offers 10.1%.

Those seem like very high yields to me. So what is going on – and should I buy the shares for my income portfolio?

Mining cycle

It is no coincidence that both of those companies are miners. I think the high yield reflects investor concerns about dividend sustainability.

Mining is what is known as a cyclical industry. What happens is that when prices are high, miners spend money developing new projects to take advantage. But such projects typically take years or even decades to move to production. So, at some point output starts to rise while demand and prices may have gone in the other direction. That mismatch of supply and demand pushes prices down further. Producers stop developing new projects and close or mothball existing ones as a low selling price makes them economically unattractive. At some point, supply struggles to match demand, prices go up and the whole cycle starts again.

That means investors can do well in some mining stocks – but they need a long-term outlook and a strong stomach. Watching a share you own lose lots of value in a matter of months despite having wonderful assets is never easy.

Potential trouble ahead

I think that cycle helps explain why both Rio Tinto and Antofagasta have unusually high yields right now. Looking ahead, investors are concerned that their dividends may need to be cut.

Both these FTSE 100 miners have done well from a boom in metals demand. Rio Tinto grew its annual dividend by 89% over the past three years. The growth at Antofagasta in the same period was even stronger, with the annual dividend more than tripling!

That sort of dividend growth can be great for an investor – if he owns the shares to start with. But what if I buy the shares now, with their double-digit yields? There is a clear risk that, when metal prices start to ease off again, the payouts will be cut. That in turn could lead to a share price fall.

The Rio Tinto share price is already down 20% over the past year, with Antofagasta shares losing 23% of their value in the same period.

My move on these FTSE 100 shares

I like both of these companies. I think they have attractive assets, long experience in the complexities of global mining, and expertise in getting product to market. That helps explain why both have made it to the prestigious FTSE 100 index in the first place.

But a worsening outlook for metal prices could spell trouble for their dividends. I think that helps explain why their share prices have been sliding. For now, I do not plan to buy either share for my portfolio at this point in the metal price cycle.