Mining Journal > Finance > Stockpile: Anglo American pushes higher on production results

Anglo American outperformed its mining counterparts on London’s main market this week following the release of the company’s end-September quarter production report.

One of just two companies to finish in positive ground (adding 1.2%), Anglo American’s third quarter production numbers were described as “strong” by Liberum Capital.

Analysis said the company’s stand-out divisions were platinum (up 11%) and diamonds (up 15%), while the sector-wide theme of weakness in copper was also a feature.

Liberum said: “Anglo’s share price performance has been (rightly) held back by sentiment on South Africa, rand currency headwinds and delays at the Minas Rio project. However, we feel Anglo has the potential to be the best performing major next as ‘self help’ cost cutting comes through; the non core asset disposal programme is progressed; key new projects are delivered; some permitting progress on Minas Rio iron ore is made and Anglo’s extreme leverage to what are likely to be improving platinum and diamond prices bears fruit.”

Elsewhere, the major miners finished marginally lower after a busy week in the headlines. Xstrata was the hardest hit, losing 3% after also reporting third quarter production results and announcing intentions to build a US$710 million ferrochrome smelter in South Africa.

Rio and BHPB were both slightly lower. The mining giants finally abandoned their iron-ore joint venture in the Pilbara of Western Australia.
However, this didn’t put an end to Rio’s ongoing expansion in the region, with the London-based company to invest a further US$3.1 billion to increase capacity to 283Mt/y.

BHPB, meanwhile, continues in its struggle to convince the Saskatchewan government of the 'net benefit' a takeover of Potash Corp of Saskatchewan Inc would bring to the province. On October 21, the provincial government formerly recommended its federal equivalent block the takeover from taking place.
Despite this, many media reports are suggesting that BHPB is edging closer to completing the deal as other jurisdictions don’t share the same view as Saskatchewan.

Also hurting the miners this week was commodity prices. Gold and copper were both headed for their first weekly fall in the past six as the period drew to a close.

The companies shedding the most ground included Randgold Resources Ltd (-9.5%), Hochschild Mining plc (-7.5%) and Vedanta Resources plc (-6%).

In the small caps, Beowulf Mining plc, the Swedish explorer, added 44% this week on no specific news. The stock has been rising for months now, having tripled since the start of August. The company has released a number of exploration results from its Kallak North and South iron ore deposit in the Scandinavian country. The latest assay results, released October 8, confirmed several 100m sections with iron mineralisation of over 30%. The company has commenced a 3,500m drilling programme and says it hopes to have a JORC classification on Kallak South thereafter. Deals in the country’s iron ore space also continue, consolidation of exploration rights taking place.

Strategic Natural Resources plc, with assets in South Africa, was up almost a third this week after the company said it had received washibility and market application studies for its first coal mine, Elitheni in the Eastern Cape. The studies represent the third and final stage of the feasibility study into the export of coal from the project. A full outcome of the feasibility study is expected by the end of October.

One of the larger capped winners of the week was Norseman Gold plc. While the company already raised the final funds to build a fourth mine in Australia a few weeks back, a positive research note from Seymour Pierce this week was the likely the catalyst behind further gains in the share price, up 16% in the week.

The note said: “The stock continues to be one of the lowest valued gold producers listed in London, but making good on the expansion plan should drive a re-rating.”

A target price of £1.80/share was indicated, compared with £0.55 at the time of publication.

Another plus-£100m company on the list was GCM Resources plc. The company announced that it would sell its interests in the Aura/GCM West African Alliance to Aura Energy Ltd for a total of US$1.9 million.

GCM's chief executive Steve Bywater said that the alliance was very successful in identifying a number of prospective opportunities in West Africa but that the focus for his company was the Phulbari coal project in Bangladesh, the development of which is awaiting the approval of the Government of Bangladesh.

Not much news driving the week’s biggest fallers. Conroy Diamonds & Gold plc fell the most, shedding nearly 19%. Eurasia Mining plc and Angel Mining plc fell 15% and 14%, respectively.