Mining majors capitulate as metals rout continues
Frik Els | November 30, 2015
PeopleMine
Mining majors capitulate as metals rout continues Gloom and doom
A couple of weeks ago, mining and metals analysts at Barclays put out a research note warning investors that while the sector is having its worst run in fifty years better days aren't necessarily around the corner.
This is how the investment bank summarized the current state of the industry when it downgraded the entire sector:
"The last 5 years have now been the worst period of performance since 1966: Looking forward it is hard to see what might pull the sector out of its tailspin. A demand shock seems unlikely given the state of China’s economy, although there are some signs of near term improvement (M2, property starts, TSF growth).
"Pinch points in supply/demand are getting pushed back implying marginal costs will govern pricing for longer. Costs themselves are under negative pressure.
"Meanwhile, returns on equity are sub cost of equity following unprecedented capex/depreciation levels, and net debt as a proportion of enterprise value is at an all time high. Finally one has to sift through valuations to find metrics that support an investment case."
The last 5 years have now been the worst period of performance since 1966
Two weeks later and their caution seems justified.
Copper is hovering not far off 2009 levels after coming dangerously close last week to falling through the psychologically important $2 a pound level. Iron ore spot prices seems destined to enter the $30s before the end of the year – prices last seen in 2007.
The price of nickel last week dipped to close to $8,000 for the first time in more than a decade and today's price compares with a 1993 to 2015 average of $13,600 a tonne.
Australian thermal coal prices hit a high in July 2008 within shouting distance of $200 a tonne but is now averaging in the $50s. Coking coal's fall has been even more spectacular with premium coking coal falling to $75 a tonne, the lowest since tracking of the spot price first began.
Share valuations have continued to fall in tandem with commodity prices.
And what little upside potential still existed for BHP Billiton (NYSE:BHP) and Vale (NYSE:VALE), the Brazil environmental disaster killed that off too.
World number one BHP had another down day in New York on Monday as investors react to the news of a "preliminary" $5 billion-plus fine against Samarco, its iron ore joint venture with Vale following a deadly dam burst in Minas Gerais state.
And what little upside potential still existed for BHP and Vale, the Brazil disaster killed that off too
The value of the Melbourne-based company has been cut in half over the last year for a market capitalization of just under $70 billion, a decade low. That compares to $270 billion in 2011 when it briefly became the fifth most valuable publicly traded company in the world, ahead of giants like Chevron and Microsoft.
Vale was already one of the worst performers in the sector but on Monday American Depositary Receipts of Vale trading in New York plunged another 9.5% bringing losses for the Brazilian company year to date to an eye-watering 63%. The Rio de Janeiro-based company is the world's number one producer of iron ore, ahead of Rio Tinto (NYSE:RIO) and BHP and also holds the top spot for nickel output.
The company's market value ascended to just shy of $200 billion in January 2011, ahead of its main rival Rio Tinto, but is now worth less than $18 billion compared to $60 billion for The world's second largest miner based on revenue Rio Tinto.
Down two-thirds just this year, Glencore is now worth $14 billion less than before the Xstrata takeover
Melbourne-based Rio Tinto which relies on copper and iron for nearly 80% of its earnings are also trading not far off lows hit during the height of the global financial crisis, but year to date losses are modest compared to its immediate peers. The Anglo-Australian giant's stock has been swinging wildly this year and is down more than 28% since the start of the year.
Glencore (LON:GLEN) made solid gains on Monday as the stock recovers from record lows hit September over worries about its debt load. The $21 billion company was first floated in May 2011 and two years later the Swiss commodities trader acquired coal giant Xstrata, turning it into the world's fourth largest miner. Down two-thirds just this year, Glencore is now worth $14 billion less than before the Xstrata takeover.
Anglo-American (LON:AAL, OTCMKTS:AAUKY), the world's fifth largest publicly held mining company in terms of output gained in New York on Monday, but its ADRs are still 66% cheaper than at the start of the year.
The company with roots in South Africa going back more than a century is, despite its exit from gold mining, arguably the most diversified of the majors thanks to its exposure to diamonds (accounting for around 25% of its earnings) through De Beers and its holdings in Anglo American Platinum.
But the slump in rough diamond prices and the platinum bust has seen its market cap tumble to $8.5 billion. Anglo now trades an astonishing 87% below its 2011 high when it was worth $67 billion.
BHP Market Cap Chart
Top 5 mining companies market capitalization data by YCharts
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Tags: Anglo American, BHP Billiton, Coal, Copper, Glencore, Gold, Iron Ore, Nickel, Rio Tinto, Vale, Zinc
Frik Els
Frik Els
Frik Els on PeopleMine Google+ Twitter
Email: fels@mining.com
Frik is editor and writer for MINING.com. Frik has worked as a financial journalist for 15 years appearing in a number of business and consumer publications including British Airways in-flight magazine, Business Insider, Investment.com, Driving.ca, YCharts and Business in Vancouver. Frik was a speaker at the 2014 Global Mining Summit in Las Vegas, the Mine Lifecycle Management conference in Salt Lake City and the 2015 Canada Investment Conference in Vancouver. (DISCLAIMER: Frik Els does not own shares or hold positions in any of the equities he writes about. Nothing written should be construed as a solicitation to buy or sell any securities. Seek the advice of a broker/dealer first.)
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Cu Au Pb Ag Zn
Mexico
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Frik Els | November 30, 2015
PeopleMine
Mining majors capitulate as metals rout continues Gloom and doom
A couple of weeks ago, mining and metals analysts at Barclays put out a research note warning investors that while the sector is having its worst run in fifty years better days aren't necessarily around the corner.
This is how the investment bank summarized the current state of the industry when it downgraded the entire sector:
"The last 5 years have now been the worst period of performance since 1966: Looking forward it is hard to see what might pull the sector out of its tailspin. A demand shock seems unlikely given the state of China’s economy, although there are some signs of near term improvement (M2, property starts, TSF growth).
"Pinch points in supply/demand are getting pushed back implying marginal costs will govern pricing for longer. Costs themselves are under negative pressure.
"Meanwhile, returns on equity are sub cost of equity following unprecedented capex/depreciation levels, and net debt as a proportion of enterprise value is at an all time high. Finally one has to sift through valuations to find metrics that support an investment case."
The last 5 years have now been the worst period of performance since 1966
Two weeks later and their caution seems justified.
Copper is hovering not far off 2009 levels after coming dangerously close last week to falling through the psychologically important $2 a pound level. Iron ore spot prices seems destined to enter the $30s before the end of the year – prices last seen in 2007.
The price of nickel last week dipped to close to $8,000 for the first time in more than a decade and today's price compares with a 1993 to 2015 average of $13,600 a tonne.
Australian thermal coal prices hit a high in July 2008 within shouting distance of $200 a tonne but is now averaging in the $50s. Coking coal's fall has been even more spectacular with premium coking coal falling to $75 a tonne, the lowest since tracking of the spot price first began.
Share valuations have continued to fall in tandem with commodity prices.
And what little upside potential still existed for BHP Billiton (NYSE:BHP) and Vale (NYSE:VALE), the Brazil environmental disaster killed that off too.
World number one BHP had another down day in New York on Monday as investors react to the news of a "preliminary" $5 billion-plus fine against Samarco, its iron ore joint venture with Vale following a deadly dam burst in Minas Gerais state.
And what little upside potential still existed for BHP and Vale, the Brazil disaster killed that off too
The value of the Melbourne-based company has been cut in half over the last year for a market capitalization of just under $70 billion, a decade low. That compares to $270 billion in 2011 when it briefly became the fifth most valuable publicly traded company in the world, ahead of giants like Chevron and Microsoft.
Vale was already one of the worst performers in the sector but on Monday American Depositary Receipts of Vale trading in New York plunged another 9.5% bringing losses for the Brazilian company year to date to an eye-watering 63%. The Rio de Janeiro-based company is the world's number one producer of iron ore, ahead of Rio Tinto (NYSE:RIO) and BHP and also holds the top spot for nickel output.
The company's market value ascended to just shy of $200 billion in January 2011, ahead of its main rival Rio Tinto, but is now worth less than $18 billion compared to $60 billion for The world's second largest miner based on revenue Rio Tinto.
Down two-thirds just this year, Glencore is now worth $14 billion less than before the Xstrata takeover
Melbourne-based Rio Tinto which relies on copper and iron for nearly 80% of its earnings are also trading not far off lows hit during the height of the global financial crisis, but year to date losses are modest compared to its immediate peers. The Anglo-Australian giant's stock has been swinging wildly this year and is down more than 28% since the start of the year.
Glencore (LON:GLEN) made solid gains on Monday as the stock recovers from record lows hit September over worries about its debt load. The $21 billion company was first floated in May 2011 and two years later the Swiss commodities trader acquired coal giant Xstrata, turning it into the world's fourth largest miner. Down two-thirds just this year, Glencore is now worth $14 billion less than before the Xstrata takeover.
Anglo-American (LON:AAL, OTCMKTS:AAUKY), the world's fifth largest publicly held mining company in terms of output gained in New York on Monday, but its ADRs are still 66% cheaper than at the start of the year.
The company with roots in South Africa going back more than a century is, despite its exit from gold mining, arguably the most diversified of the majors thanks to its exposure to diamonds (accounting for around 25% of its earnings) through De Beers and its holdings in Anglo American Platinum.
But the slump in rough diamond prices and the platinum bust has seen its market cap tumble to $8.5 billion. Anglo now trades an astonishing 87% below its 2011 high when it was worth $67 billion.
BHP Market Cap Chart
Top 5 mining companies market capitalization data by YCharts
PeopleMine
Barrick, NovaGold project in Alaska a step closer to becoming the region’s largest development
Nov 30, 2015
CHART: China vs copper – much better than you think
China to slash copper output by 5%
Nov 29, 2015
china money
Yuan could soon sit inside elite basket of currencies
Nov 29, 2015
African Minerals founder to buy broke London Mining's Sierra Leone assets
African Minerals sued by Sierra Leone villagers
Nov 29, 2015
Tags: Anglo American, BHP Billiton, Coal, Copper, Glencore, Gold, Iron Ore, Nickel, Rio Tinto, Vale, Zinc
Frik Els
Frik Els
Frik Els on PeopleMine Google+ Twitter
Email: fels@mining.com
Frik is editor and writer for MINING.com. Frik has worked as a financial journalist for 15 years appearing in a number of business and consumer publications including British Airways in-flight magazine, Business Insider, Investment.com, Driving.ca, YCharts and Business in Vancouver. Frik was a speaker at the 2014 Global Mining Summit in Las Vegas, the Mine Lifecycle Management conference in Salt Lake City and the 2015 Canada Investment Conference in Vancouver. (DISCLAIMER: Frik Els does not own shares or hold positions in any of the equities he writes about. Nothing written should be construed as a solicitation to buy or sell any securities. Seek the advice of a broker/dealer first.)
Sponsor Links
IntelligenceMine.com: Mines, Projects, Companies, Maps and other rich intelligence.
The 360° Mining Course: People, Mines, Companies, Commodities, Methods, and more.
Who's Hiring
Shell: Let’s build a better energy future.
Suncor Energy: More pride. More growth, More success.
SRK: Earth & water resource services
Nyrstar: Resources for a changing world
Barrick: Responsible mining. Remarkable people.
Goldcorp: Together, creating sustainable value.
Vale: We don’t offer jobs, we offer futures.
Kinross: Discover the Kinross way
Add your company »
Expert Advice for Your Job Search
Schlumberger | Routine water management
SPONSOR POST
For our latest news, please visit our website or SRK page.
Boart Longyear | 125 Years of Expertise
SPONSOR POST
Don’t let your marketing material become landfill
How would you like your marketing to hang on your customer’s wall instead of ending up in a recycling bin? Develop a custom map to promote your company while offering a compelling list of mining assets and infrastructure. Contact 604 683 2037 or map-ads@infomine.com
InvestmentMine Presents: The Mining Investment Show
Add your company »
#24244
Alta Vista Ventures Ltd provided a company update. Nov 27, 2015
0.19 CAD
0.08 (76.19%)
Mkt Cap:
2 M USD
AVV:CNSX, YAB2:FWB
Cu Au Pb Ag Zn
Mexico
Management:
Ian Foreman, President
InvestingNews
Capital Raisings
I'm in it to win it!
NASDAQ DIP and RIP
Here is the best word that describes what i do here.
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means having the ability to understand or know something without any direct evidence or reasoning process.
I was born with it, I'm truly blessed!
Alway's searching for winners'
NASDAQ DIP and RIP
Here is the best word that describes what i do here.
Intuitive;
means having the ability to understand or know something without any direct evidence or reasoning process.
I was born with it, I'm truly blessed!
Alway's searching for winners'
