Investment Insights

Mining's mandarins

Celebrating 20 selected mining stocks, at the top of the list of "best performing" mining stocks across the planet.

Barry Sergeant
11 December 2008 13:57

The world's top 100 mining stocks may have surrendered a combined $1,7trn in market value this year, from peak prices, but the strong recovery during recent weeks has seen a bounce of no less than 52% from "the bottom of the trough". While the combined value of the top 100 mining stocks has increased from a low of $495bn to $756bn, individual stock performance has varied widely.

Mining stocks specialised in producing nickel, diamonds, zinc, silver, tin, copper and platinum remain deeply mired in the swamplands. At the other end of the scale, the world's "best performing" mining stocks are dominated by gold diggers, along with a few uranium names, and the odd stray from other sectors. This may hardly be surprising, given that the price of dollar gold bullion has fallen only around 25% from its peak, compared to losses of 60% and more for the likes of crude oil, platinum, copper and nickel.

While the relationship between the pricing of specialised mining stocks and commodity prices remains common cause, choices of individual stocks always demands a great deal of finesse. Thus, while Tier II gold stocks - such as Eldorado - rank as the best-performing subsector within gold names, there are a number of Tier II gold stocks that are now trading at more than 80% below high prices, such as Centerra, Peter Hambro, Golden Star, New Gold, and even more than 90% down, as in the case of High River.

JSC Polymetal, also a member of the Tier II gold group, may at first glance rank asthe best performing gold stock overall, but it has risen from a terribly low base, given the especially savage sell off in Russian stock markets. Russian general equity indices have so far provided one of the best "bounces" from recent bottoms, up around a quarter from lows, more or less matching the best bounces across the planet, as seen in China, Mexico, Brazil, India, Indonesia, Poland, Hong Kong and South Korea.

Staying among gold stocks, and applying wider metrics, there is little to compete with the price returns from Tier I member Kinross, with its standing market value of $10,8bn, relatively low price volatility, and the ongoing mantra of continuing a quantum conversion from an old, declining high cost producer, to a low cost one with highly attractive growth curves going forward.

On pure stock price performances, however, Kinross has been outpaced by four other gold diggers, Western Goldfields, Aurizon, Eldorado, Zhao Jin, and also JSC Polymetal.

There is a appealingly broad geographical spread represented by the top performing gold stocks, from Western Goldfields (western US), to Hong Kong listed Zhao Jin, two Canada-listed African gold miners, Red Back and Semafo, and three Tier I transnational names, AngloGold Ashanti, Harmony, and Goldcorp.

Back to the overall global mining sector, it's probably fair to say that uranium developer Hathor Exploration ranks - currently at least - as the best price performer of them all, given a cut off of stocks with a market value of at least $ 100m. With a relatively modest market value close to $200m, Hathor's performance is heavily based on highly encouraging results from its Midwest NorthEast project, in the Athabasca basin in northern Saskatchewan, adjacent to the joint venture Areva-Denison-OURD Midwest deposit. The Athabasca basin hosts the world's highest grade uranium deposits, not least the McArthur River and Cigar Lake mines, in the stable of Cameco, the world's biggest uranium miner.

There are other uranium names among the world's top performing mining stocks: Namibian uranium developer Extract Resources (36% of which is held by London-listed Kalahari Minerals), in which Rio Tinto, a major uranium producer, recently bought 13% stake. Earlier this year, Niger Uranium acquired a 17% stake in Kalahari Minerals. Rio Tinto is also the majority stakeholder in ERA, another uranium producer and one of the world's top 20 performing mining stocks. Forsys, another Namibian uranium name, is also a top performer, but ranks as a special situation, as it is subject to a takeover bid.

Beyond gold and uranium stocks, the world's selected top 20 best-performing mining stocks also includes Hong Kong-listed Hunan, a diversified metals player; debt-free Australian coal miner New Hope, Uralkali, the Russian potash coal miner, and London Mining, with interests in coal and iron ore, and lots of net positive cash on its balance sheet

http://www.moneyweb.co.za/mw/view/mw...