London 2012 – not going much for gold! « Mining Blog

London 2012 – not going much for gold!

10. August 2012,

As night follows day, so “natural resource” investors follow the fortunes of the world’s most important mining companies.

And as many of them report their first-half results for 2012, it’s no surprise that London-based companies remain ahead of the field.

However, their performances have hardly been of Olympian proportions.

According to Mineweb (8 August 2012), “few mining company stocks have ever got back to their peaks prior to the mega-crash of Q3 2008…as the global recession has bitten and commodity prices have, for the most part, been hit hard, the biggest global mining companies have seen their stock prices, and market capitalisations fall.”

On average, these so-called “marcaps” are around 30% below their past annual highs.

Among the global “top ten” mining giants, Canada’s potash miner PotashCorp is now stronger in the market than the world’s number one gold producer, Barrick Gold, and copper-gold miner Freeport McMoRan.

However, says Mineweb,”the differentials between some of the bigger ones have narrowed – in particular between Rio Tinto and Vale.” (the world’s biggest iron ore miner). It’s not hard to see that Rio Tinto – with massive plans to expand iron ore mining in Australia – may soon bolt ahead of the Brazilian company, to come in behind BHP Billiton,the world’s leading company in the mining sector .

Here’s where the contenders currently line up for the resource races ahead: BHP Billiton (listed in Australia and Great Britain); followed by Vale; Rio Tinto (listed in GB and Australia); Anglo American (a pure “Team GB”) and Xstrata (based in London, dual-listed in the UK and Switzerland).

Meanwhile, the shine has come off Gold, with Barrick and Goldcorp having, says Mineweb, “seen their stocks suffer accordingly…Of the other top gold miners, Newcrest and Newmont both come in just below the top 10 global miners of all types.”

Mineweb tries putting an optimistic spin on these lacklustre performances by the most-muscled miners, commenting: “Even so, the overall market situation, coupled with their strong balance sheets and cash generation abilities, does give them some great opportunities to build at the expense of those further down in the pecking order.”

So, what are the chances of a flurry of mergers and acquisitions (M&As) in the near-future? One of the most significant “developments” of late has been the growth in shareholder pressure on companies, to return more profits to their own pockets – rather than splurge surplus cash on buying-up smaller runners in the field.

Mineweb admits:”With the global slowdown not showing any real signs of improvement, prices may continue to suffer until the markets, and commodity prices, begin to see something of a sustained upturn.”

Nonetheless, “as weaker stock and commodity prices begin to adversely affect new mine developments and existing mine expansions there is definitely the prospect that anticipated supply growth will not materialise” .

It’s anyone’s guess as to whether the medal winners of this year’s Olympic games will triumph at Rio de Janeiro in 2016.

Nor would I place any bets on which top miners will cross the line in four years’ time.

Or even which of them will be in the running.

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