Resource turmoil favours coal, copper and precious metals

Global investment flows over the past week most favour listed miners of coal, gold, silver, copper and platinum.

Author: Barry Sergeant
Posted:  Monday , 22 Sep 2008

JOHANNESBURG - 

By Tuesday last week, the world's top 20 mining and top 20 oil stocks had lost USD 2.2 trillion in market value (capitalisation), from record highs seen over the past 12 months; ahead of the opening of markets in the Americas on Monday, close to USD 400bn of that lost value had been clawed back.

An analysis of investment fund flows towards and away from more than 800 globally listed resources stocks over the past four-and-a-half trading sessions indicates positive inflows for all subsectors. Listed Tier I Asian coal producers have been the most heavily favoured, followed by listed miners of tin, coal, gold, silver, copper and platinum.

In the commodity markets, gold ranks as the best price performer among precious metals, while copper leads base metals. Tin, by far the smallest base metal, is appropriately represented by relatively few miners, which, in turn, are dominated by two Asian names, Yunnan Tin, and Timah.

Despite significant surges in the past two trading sessions, Asian stocks in general remain heavily depressed, following the bursting of wider equity bubbles dating to October 2007. The Shanghai Composite index, for one, currently trades 64% below its highs.

The world's biggest listed coal miner, China's Shenhua, currently trades at 74% below its highs; generally smaller falls have been experienced by other Asian coal names such as China Coal, Shanxi Xishan, Yanzhou Coal, Shanxi Lu'an, Hedei Jinniu, Kailuan, Huolinhe, Shanxi Guoyang, Shanghai Datun, Taiyuan, Zhengzhou Coal, Anhui Hengyuan, Indo Tambangraya and Bumi Resources. Zijin, a diversified Chinese miner that also ranks as a global Tier I gold miner, is trading close to 80% below its highs.

In terms of investment flows, the least favoured global resources sub-sectors in the current environment include listed names in the Tier II iron ore category, diamonds, nickel and uranium. The relative disinterest in iron ore stocks may appear curious, but stocks across the sector, including of course Tier I names ValeBHP Billiton and Rio Tinto, which also classify as the world's three most valuable listed miners, have been relatively well priced for some time, in line with dollar iron ore prices holding well up, in contrast to most other commodity prices.

Potash prices have also held, underpinning the status of listed potash stocks as the best performing subgroup in the world. By the same token, potash stocks have only attracted mild interest over the past few days.

It is clear that the recent reassurances on US credit markets have encouraged investors to seek riskier assets. The general inflow towards resources stocks has followed a wider global trend, inspired by Thursday night's announcement of a plan to start sanitising toxic mortgage bond debt in the US. The fine details are under formulation, but the plan appears to involve hundreds of millions of dollars of US taxpayer money.

While the recent inflows into listed resources stocks will come to the relief of thousands of miners and oil riggers across the world, the standing level pricing of stocks still leaves lots and lots of work to be done.

GLOBAL LISTED RESOURCES STOCKS







Relative net fund inflow rate, September 16 to 22













IMC*

From

Stock







USD bn

12m high

sample

1

Tier I coal stocks (Asia)**

32.2%

115

-68.7%

20

2

Tin stocks

29.4%

3

-74.4%

13

3

Coal stocks

27.3%

354

-58.7%

122

4

Gold stocks

32.8%

160

-48.4%

179

5

Tier I gold stocks**

33.5%

117

-43.8%

14

6

Tier II gold stocks**

25.3%

22

-49.5%

19

7

Silver stocks

24.8%

15

-58.4%

43

8

Copper stocks

24.4%

120

-51.8%

64

9

Tier I platinum stocks**

24.3%

50

-39.0%

3

10

Silver ETFs

23.0%

3

-39.5%

3

11

Platinum stocks

21.3%

66

-44.0%

52

12

Tier I coal stocks (non-Asia)**

19.7%

99

-38.6%

30

13

Oil stocks

19.4%

2452

-32.9%

47

14

Mining majors**

19.2%

933

-45.2%

20

15

Gold ETFs

19.0%

27

-13.1%

9

16

Molybdenum stocks

18.9%

13

-58.1%

20

17

Zinc stocks

18.2%

22

-71.8%

12

18

Oil sand stocks

17.7%

51

-24.4%

15

19

Tier I iron ore stocks**

16.8%

130

-39.3%

3

20

Aluminium stocks

15.9%

49

-54.0%

12

21

Iron ore stocks

14.4%

230

-41.9%

78

22

Uranium stocks

13.8%

39

-59.3%

106

23

Potash producers

13.3%

135

-40.6%

12

24

Uranium producer stocks**

11.7%

14

-53.3%

5

25

Nickel stocks

10.0%

23

-60.7%

19

26

Diamond stocks

9.5%

9

-57.8%

22

27

Tier II iron ore stocks**

7.6%

70

-45.4%

16







3772



828



* Investable market capitalization











** IMC counted in other sub-sectors











Source: Analysis by Barry Sergeant