Mining Journal > Finance > Stockpile: Better metals prices lift mining stocks

A rally in base metals has helped lift mining stocks this week after some commodity prices touched 2011 lows just a few weeks earlier.

Positive comments out of the Group of Eight (G8) summit in France regarding an improving world economy, coupled with better Chinese demand, fuelled the gains.

A draft statement released on the back of the two-day G8 summit said: “The global recovery is gaining strength and is becoming more self sustained.”

Copper inventories in Shanghai have, meanwhile, been declining for 10 straight weeks, highlighting demand for the metal.

On Friday, analysts at Barclays Capital said: “Prices have rallied on signs of strengthening Chinese demand, tightening spot availability and in the case of copper in particular, reminders that the supply side of the market is very tight this year.”

Mineral sands producer, Kenmare Resources plc was the top gainer of the week with a near 8% rise. Higher prices for the commodities it produces have helped lift the stock 43% so far this year. Analysts RBC Capital Markets have revised their price forecasts for zircon, rutile and ilmenite upwards for the second time in three weeks.

“The minerals sands sector offers the prospect of strong demand growth and tight supplies which should result in firm prices in the medium term,” said an RBC research note.

Copper producer Antofagasta plc was also up by nearly 8% as the company reported March quarter earnings showing a 30% increase on the year before period mainly due to higher sales prices. Precious metals have also gained with gold heading for a third weekly gain by lunchtime on Friday.

Silver producer Fresnillo plc gained almost 7% in the week but was still trading about 4% lower than a month earlier. Gold producers Randgold Resources plc and Petropavlovsk plc were up over 3% for the week.

On Tuesday, Glencore International plc began trading unconditionally in London. The share price at £5.23 by Friday afternoon still remains below the initial public offering level of £5.30/share.

On AIM, Toledo Mining Corp plc shot 20% higher after releasing plans for its Berong nickel joint venture in the Philippines.

Toledo said the mine would be re-opened and ramp-up to full production by the middle of next month. The company said the mine is targeting production of 500,000t (wet) of nickel ore by the end of 2011, and is aiming to ship 300,000t by September 30.

Beowulf Mining plc added 13% for the week and is now 67% higher for the year. The company has appointed mining expert Fred Boman to its board as production director.

Other top performers for the week included European Nickel plc and Herencia Resources plc, which gained 30% and 20%, respectively.

Mwana Africa plc was the biggest faller with a 17% drop after announcing plans to raise funds. The company said it has conditionally raised £9.27 million (US$15 million to explore its Semhkat base-metals properties in the Democratic Republic of the Congo. Funds would also be used to finance the care and maintenance programme at its Bindara nickel complex in Zimbabwe.

Australian-based Thor Mining plc was 13% lower on news of a £400,000 (US$657,000) raising to fund its exploration and evaluation programmes at the Dundas and Spring Hill gold projects.

Tanzanite One Ltd, last week's top performer, fell close to 10% after releasing details of a potential second listing on the Dar es Salaam stock exchange. The company, which estimate it produces half of the world's rough tanzanite, says the listing could allow it to use scrip for local acquisitions.

Other companies to make significant losses included Bellzone Mining plc and Baobab Resources plc, which were down 15% and 13%, respectively.