Platinum, copper, uranium names attract
August 31st, 2008 | by mantrionline |The sell off in global resources stocks, starting up in mid-May and accelerating hard in mid-July, precipitated the loss of around USD 1.7 trillion in market value by the top 40 listed resources stocks, the leading 20 names in each of mining and oil. The losses halted, for the meantime, a week ago, and since then around USD 200bn of market value has been clawed back.
In relative terms, within the global resources sector, mining and oil majors have offered a fair degree of resistance to the sell off. The toughest of the bunch have been miners of potash, coal (non-Asian), and iron ore. The heaviest losses have been sustained by stocks specializing in the mining of zinc, silver, molybdenum, uranium and nickel.
Among mining majors, the most resistant names so far have proved to be BHP Billiton (diversified, with exposure to mining and oil), Anglo American (with a major exposure to platinum, and also copper), and K+S, the potash miner. Vale and Norilsk continue to be heavily sold off on nickel exposures, while Shenhua and NMDC remain victims of the broader sell off of equities in Asian markets. Xstrata has lost some favour recently on its exposure to lead, zinc and nickel. Among oil majors, Exxon Mobil, Chevron and ConocoPhilips rank as the most favoured names.
Over the past seven days, the favoured rotational sub-sector attractions have been top names in platinum, followed by copper, aluminium and uranium. Global rotational flows and performance rankings among resources stocks have been broadly in line with commodity price performance.
Widely held weighted commodity indices have been impressively resilient, relative to both commodities and listed resources stocks, with the Reuters/Jefferies CRB index currently 16% off its highs, and the Dow Jones AIG Commodity index 19.5% down. These numbers compare to a weighted average price fall of 36% for the top 20 miners, and a similarly measured 27% price fall for the top 20 oil majors.
Among analyst calls this week, Citigroup mentioned “pockets of opportunity” including Peabody, Freeport McMoRan, structural changes in aluminum, and “M&A in metallurgical coal, mid-tier steel, and quality mine developers.” Royal Bank of Canada published quarterly commodity revisions, and emphasised that it was only coal, iron ore and uranium that emerged with forecast higher annual average prices in 2009 versus 2008 levels.
Listed gold stocks remain heavily sold off; the weighted average fall of 179 names is now at 44% from high stock prices, compared to a fall of 19% in the dollar gold price. For listed silver stocks, the weighted average fall for 43 names has been 51%, compared to a fall of 36% in the dollar metal price. Dollar gold bullion prices fell more than USD 200 an ounce between mid-July and mid-August, moving in virtual lockstep with the strengthening of the dollar. By way of contrast, major platinum stock prices have fallen in line with the 36% contraction in the dollar platinum metal price.
