Last year ended quite well for a fair number of miners.
This is the second and final part to a look back on the top 100 mining companies in 2014. Part 1 here. If 2014 was a dismal year for many in the mining sector – especially in bulk commodities – there were bright spots and, in many cases, strong performances.Those more heavily weighted to base metals had pretty strong showings. While the price of copper didn’t do much in 2014, it held steady at least, while zinc and lead prices climbed somewhat. This was evident in share prices. Lundin (65) was up 18%. Hudbay (86) gained 13%. And Hindustan Zinc (17) climbed 30%.
Meantime, the integrated aluminium producers/miners rebounded in 2014 after some hurtful years of plummeting aluminium prices. Notably, Alcoa (10) was up 47% and Rusal (19) 135% in the past year.
And even gold companies didn’t have that a terrible year overall. If the majors had a rough go of it (e.g. Barrick (13) down 33%) many fared quite well, posting decent rebounds and ending the year higher than they began it.
The South African gold companies in particular had upward momentum. Randgold (39), with a strong showing in the past few weeks, started 2015 up 28%. Gold Fields (57) surged 81%. Sibanye Gold (85) climbed 99%.
In North America there were also strong performances among gold miners (again, outside the majors). Agnico Eagle (42) was up 15% from a year ago. Eldorado Gold (51) gained 25% and Fresnillo (24)was up 7% in the past year. Beyond the miners the royalty and streaming companies also did well. Franco-Nevada (30), Royal Gold (53) and Silver Wheaton (31) were up, respectively, 25%, 35% and 10% the past year.
And in China two companies stood out: Shandong Gold (46) and Zhonghin (45): up 36.5% and 51% respectively.
So was 2014 really that bad for gold equities?
In other ways, 2014 was also notable for declining output of non-ferrous metals, which could prove bullish. Analyst John Tumazos, of John Tumazos Very Independent Research, thinks so and points out that it’s widely under appreciated non-ferrous mine production was way down in 2014.
He rattles off a list: zinc production down 7%, lead down 18%, bauxite down 21%, nickel down 27%, platinum down about 25%, and copper about even. These production declines were one of the most significant stories of 2014, Tumazos reckons, not the the crashing iron ore price. Combine this with other supply issues, and Tumazos concludes there are “many bullish developments in the non-ferrous metals.”
And don’t forget oil. The energy sector’s pain may be the miners’ gain. BMO analyst Tony Robson highlights oil’s collapse in 2014 as an important theme that may boost miners. This – the lower price of oil – gives “some hope of profit and cash generation by the miners being assisted by lower costs.” Bulk miners will obviously benefit, he notes. So too will others that rely on diesel generation at their (presumably remote) mines.
So 2014 proved disastrous for some of the major miners, especially those at the top of the rankings with exposure to iron ore, coal and oil. But look deeper into the field and all was not rot. Indeed, the year ended quite well for a fair number of miners.