Top 100 #mining companies: Ugly at the top (Part 1) @Mineweb

“The iron ore companies are uniquely delusional”
"BHP Billiton, still the world’s largest company, shed an astounding $31 billion or 27% of its market cap."

 

Last year was abysmal for iron ore, oil
and coal prices - chief commodities for many of the diversifieds.

In a two-part retrospective, we look
back the mining sector in 2014. First we start with the fate of the top
100 miners – some ugly stuff here – but then turn to some more positive
and perhaps underappreciated developments.
It wasn’t a good year to be a big miner. Ranking the top 100 mining
companies by market cap near year end and tabulating their 52-week share
price performance tells the ugly tale (see below). BHP Billiton, still
the world’s largest company, shed an astounding $31 billion or 27% of
its market cap. The next seven names at the top were all losers. Rio
Tinto and Glencore’s share prices were off by about eight percent;
Vale’s dropped 41%; Anglo American’s was down 10%; Norilsk’s was down
seven percent; Freeport’s shareprice slumped 37%; and Southern Copper
ended close to, but not quite, the even mark.


In looking back on 2014, it’s not hard to account for the share price
pain of the top miners. Last year was abysmal for iron ore, oil and
coal prices – chief commodities for many of the diversifieds. Meantime,
investor sentiment toward the miners and their prospects seemed to reach
new lows. In the past couple years, there was a great deal of shuffling
in mining management reflecting shareholder unhappiness with business
plans, share price returns, thin cash flow and capital expenditure blow
outs.


The cratering iron ore price, especially, caught many in the market
off guard. Though a decline in iron ore was bound to come, BMO mining
analyst Tony Robson notes in an email, “most of us were thinking late
2014 or 2015, not early/mid 2014.” And he, as others, expected a “steady
decline not a savage collapse”. An unprecedented gulf between supply
(growing) and demand (slowing) emerged in 2014, one that is by many
accounts here to stay.


Some analysts and mining management lambaste the diversifieds for
angling to maintain market share through mine expansion. Ivan Glasenberg
– chief executive of Glencore – has cut into BHP Billiton and Rio Tinto
for their strategy to grow amid an iron ore glut as being ill conceived
and bad for business. Likewise, analyst John Tumazos, of John Tumazos
Very Independent Research, derides the business strategy.


“The iron ore companies are uniquely delusional,” Tumazos says. He
points to clear signs that Chinese steel demand, which dominates iron
ore use, is set to be lacklustre relative to supply growth for years to
come. But “the guys that own 400 tonne trucks just don’t want to admit
it”.


Looking beyond iron ore, it was equally tough for some other mining
sectors. The major gold miners are well off over the year, especially
Barrick. The top gold miner, by production, shed some 30% over the year.
Goldcorp, the top gold miner by market cap, was also in negative
territory – just. And it was a similar fate for many of the other large
gold miners. Newmont was down near 15%. Polyus lost five percent. And so
on. If the price of gold wasn’t obliterated in 2014 as in 2013, it
muddled along for much of the year. This, combined with investors
sceptical of growth plans by the major gold miners, undercut the gold
miners.


In uranium – where prices were weak until a recent bump up – it was
much the same. Cameco, the leading uranium miner was down 15%. The
legacy of the Fukushima disaster in Japan lingers. As David Talbot, a
Dundee Capital Markets analyst, notes, it will likely take a return of
Japan reactors to turn the market around. “Japanese restarts will likely
be largest issue,” he says. “Getting Japan back into operation is
likely to be a strongly psychological driver – if not necessarily about
real demand.”

THE TOP 100 MINING COMPANIES IN 2014

Rank	Company	Marketcap (US$bn)	1-year change
1	BHP Billiton PLC BLT:LSE	$115.83	-26.63%
2	Rio Tinto PLC RIO:LSE	$83.59	-7.85%
3	Glencore GLEN:LSE	$58.36	-8.05%
4	Vale SA VALE:NYQ	$42.85	-40.60%
5	Anglo American PLC AAL:LSE	$24.39	-9.67%
6	Norilsk MNOD:LSE	$23.83	-6.95%
7	Freeport-McMoRan Inc FCX:NYQ	$23.74	-37.64%
8	Southern Copper Corp SCCO:NYQ	$22.51	-1.08%
9	Grupo Mexico SAB de CV GMEXICOB:MEX	$21.73	0.97%
10	Alcoa Inc AA:NYQ	$18.21	46.68%
11	ArcelorMittal SA MT:NYQ	$17.12	-40.46%
12	Goldcorp Inc G:TOR	$16.38	-1.29%
13	Barrick Gold Corp ABX:TOR	$12.96	-33.15%
14	Aluminum Corp of China Ltd ACH:NYQ	$12.25	60.84%
15	Zijin Mining Group Co Ltd 2899:HKG	$11.90	37.21%
16	Norsk Hydro ASA NHY:OSL	$11.07	51.69%
17	Hindustan Zinc Ltd HINDZINC:NSI	$10.95	30.05%
18	Antofagasta PLC ANTO:LSE	$10.74	-7.82%
19	United Company RUSAL Plc 486:HKG	$10.39	134.96%
20	Newmont Mining Corp NEM:NYQ	$10.01	-16.12%

To see the rest of the listing, click here: Top 100 mining companies: Ugly at the top (Part 1) - Mineweb



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