The Mining Mongrel: A Weekly Review

Hi everybody, I figured you were probably all tired of me waffling on so... I've handed the reigns over to my friend Charles Stephenson for a new weekly feature focusing on London's markets and movements. Make sure to reach out and follow Charlie on Twitter and LinkedIn for more. Cheers, Liam

Welcome to the Mining Mongrel, a London focused weekend round-up of events in the mining and resource space.

This week has seen some stability in the metals and mining sector, with no particularly extreme swings in the market in comparison to what we have experience throughout March. Saying that, O&G has seen prices souring, with Brent rising 50% in the largest ever one day rally (02/04/20). This was due to comments from Donald Trump which stoked up hopes of a supply cut of up to 15m barrels per day. The ongoing price war between Saudi Arabia and Russia has caused oil prices to fall from $60 at the beginning of the year, down to lows of $~20. This affect on the mining sector should be relatively positive, particularly with the bulk commodity producers. With Putin now stating he could live with prices as low as $42 and the current price of around $34, saving to producers Opex could be rather noticeable.

Miners

  • Antofagasta reduce work force at operations due to Covid-19
  • Fresnillo see gross profits in 2019 down by 40.9%
  • Production continues at Pembridge’s Minto mine, with restrictions on non-essential travel
  • Anglo American announces the Prospectus of its subsidiary, Anglo American Capital plc.

Producers on the LSE have seen a relevel good bounce back from the mass sell-off as retail investors scramble for liquidity.

With generally high commodity prices in 2019, most producers have come into the Coronar events with strong balance sheets and are expected to weather the near team events with little affect. Production around the world has slowed down, in particular Mexico, much of South America and South Africa where mandatory shutdowns have occurred, making any producers still operating attractive destinations for investors.

Junior Explorers

  • Armadale Capital release DFS
  • Newcrest are proceding to stage 3 in the earn-in agreement at GGP’s Havieron Au project
  • Thor Mining have produced an update on the Spring Hills Royalty deal
  • IronRidge produce their interim results, boasting strong cash position.

 

In the junior sector through the last mouth has seen a huge range of results, with some stocks plunging dramatically, others thriving and a few showing little impact. In general, those with projects in the later stages of development and in precious metals have seen the strongest share performance, with significant bounce backs, being seen as both ‘safe havens’ and with the word ‘peak gold’ starting to return to circulation and majors holding cash, takeovers are a strong possibility. Whereas the base and battery metals market have seen more selling with the inevitable reduction in near term demand.

Analyst's view:
If the corona event ends in the relatively near term, producers who are able to stay operational will be a great place to invest, as they will be able to thrive of inflated commodity prices as world supply falls. As a result we could see, with their strong cash positions a large number of takeover and earn-in agreements. If the event continues extensively, mines will have to look at moving into care and maintense. Supply naturally will drop inflating commodity prices, despite a general fall in demand. From this point, smaller producers and juniors should become more attractive, being able to react rapidly to changes in the situation.