Mining Roundup for January

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Submitted by J. Frank Sigerson as part of our contributors program.

Mining Roundup for January

As crude oil prices continue to fall and affect the global markets, the mining sector in various parts of the world struggles to maintain some semblance of control and keep the industry healthy. According to the latest study by SNL Metals and Mining, 2014 proved to be a trying experience for commodities. December, especially, had less exploration activity than expected, with only 111 drill projects announced.

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The report further showed that the mining industry’s market capitalization fell to under $1,300 billion at the end of the year. This is a dismal figure compared with February 2012, when capitalization was at $2,000 billion.

Here are a few more updates from several mining companies:

Trouble in Zimbabwe

According to Bloomberg, it looks like Zimbabwe’s mining industry is on the brink of shrinking after five years of fruitful production. Falling victim to a crucial decrease in metal prices, as well as scarce capital, the third biggest producer of platinum in the world will experience reduction by as much as 2%. Gold is already down at 25%, while platinum has slipped at 8.2%.

This is a blow to a country that has relied so much upon mining — it is the main pillar of their exports, even more so than tobacco. Companies like the Impala Platinum Holdings Limited (OTCMKTS:IMPUY) are surely affected; its shares are down by 2.44% and last closed at 6.99. The same can be said of Anglo American Platinum Limited (OTCMKTS:AGPPY), whose shares plummeted by 5.30% and last closed at 5.36.


Discrepancy among miners in Australia

In Australia, meanwhile, more than 500 people stand to lose their jobs, per a report from the Wall Street Journal. Arrium Limited (ASX:ARI) can no longer compete with the iron ore glut and is forced to shut down one of its mines, writing off as much as $1.07 billion. The company’s shares has fallen by 8.89% and last closed at 0.205.

Nevertheless industry giants BHP Billiton Limited (NYSE:BHP) and Rio Tinto PLC (NYSE:RIO), despite also experiencing a slump in shares by 3.83% and 4.05% respectively, are still making profit, enough to keep their heads above the water. Both companies refuse to slow down in production of iron ore, despite a decrease in demand from China.

Says Tim Schroeders, a fund manager at Pengana Capital in Melbourne: “The longer we see prices stay down, the more we’re going to see higher-cost producers curtail production.”


Some good news from Russia and India

Sentiments in the Russian Federation, on the other hand, remain optimistic, a remarkable perspective given that the country is going through a lot of conflict at the moment. Norilsk Nickel (OTCMKTS:NILSY), for one, is benefitting from a weak ruble, according to The Moscow Times. In an interview, CEO Vladimir Potanin explains that even if there is a decline in the revenues for nickel and copper, the depreciation of the ruble is “significantly compensating” for it, allowing the company to maintain its margins.

Amur Minerals Corporation (OTC:AMMCF) on the other hand, is anticipating the approval of their exploration and production license for its flagship nickel sulphide project, Kun-Manie. With more than 120 million tonnes of mineralization in recorded reserves, investors are confident that it would obtain an endorsement from the government.

Finally, India is planning to open its coal industry for commercial mining, per Reuters. Prime Minister Narendra Modi has finally passed an executive decree that will allow bidding from outside firms, such as the Adani Group (ADEL.NS).

Sources:

http://go.snl.com/rs/snlfinanciallc/images/Industry-Monitor-Overview-Jan-2015.pdf
http://www.bloomberg.com/news/2015-01-19/zimbabwe-chamber-sees-mining-shrinking-for-first-year-in-five.html
http://www.wsj.com/articles/iron-ore-slump-snags-australias-arrium-1421987955
http://www.themoscowtimes.com/business/article/russia-s-norilsk-nickel-says-weak-ruble-helps-offset-fall-in-metals-prices/514814.html
http://in.reuters.com/article/2015/01/23/india-coal-davos-idINKBN0KW20T20150123