Yesterday's news, and perhaps tomorrow's, is that the dollar is in a bit of a funk that may extend for months; the more useful news is that global stocks, in general, have risen now to seven month highs, as illustrated by the level of the benchmark MSCI world equities USD index. This broad measure, buoyed by the effect of strongly rising emerging market stocks, has outperformed the likes of the Dow Jones Industrial, S+P 500, and DJ Stoxx 600.Within the global stock markets universe, listed mining stocks have staged the leading recovery, in percentage terms, from price troughs, generally seen during October and November 2008. This is a notable performance, given that banking stocks, especially in certain well know countries, were severely sold down; some disappeared or were swallowed up by bigger rivals. The world's biggest 100 mining companies, by market value, have now bounced by 141% on average, measured on a weighted average basis. Confidence in mining stocks has increased for fundamental reasons; among the latest, China's manufacturing has expanded for a third successive month, and the country has increased fuel prices.

STOCK GROUPS

Value

From

From

USD bn

high*

low*

Dow Jones Industrial

2754.68

-35.7%

39.0%

Top 100 global miners

1381.67

-45.5%

141.3%

Silver stocks

23.33

-32.0%

306.4%

Oil stocks

2485.49

-35.9%

58.9%

S + P 500 Energy

1083.19

-42.0%

46.1%

Zinc stocks

28.27

-39.6%

206.4%

Copper stocks

118.67

-44.1%

218.6%

Gold stocks

304.32

-26.9%

183.5%

Gold ETFs

46.77

-12.6%

36.2%

Uranium stocks

27.94

-34.6%

162.8%

Paper stocks (60)

54.98

-45.0%

99.2%

Shipping stocks (32)

37.07

-63.2%

111.2%

World banks (80)

2580.37

-44.1%

103.4%

* 12-month

Source: market data; analysis by Barry Sergeant

Seen over the past 12 months, the best net price performance has been delivered by listed primary silver producers, led, in turn, by London-listed Mexican miner Fresnillo, followed by specialist miners of copper, zinc, gold, tin, nickel, uranium, iron ore, molybdenum, coal, potash, platinum, and, finally, oil sands.There is only a limited degree of correlation between the order of these performances, and changes in underlying dollar commodity pricing. Thus while dollar gold bullion is currently within a hair of its 12-month, and all time record, high, gold stocks generally have been outperformed by primary silver miners. Dollar silver bullion is around 18% below its highs, but its bounce from the bottom of 88% has outperformed the comparative 45% number for gold bullion.The comparison is starker when listed gold stocks are compared with copper peers, given that dollar copper prices are currently just over half the record levels seen in mid-2008; in other worlds, roughly 50% below highs. One possible explanation is that copper (and many other) stocks were oversold during the market panic in the latter part of 2008, while listed gold stocks, supported by a relatively stronger commodity, fell by less.

METAL PRICES

Low*

High*

Current

From low

From high

Precious, USD/oz

Gold

682.41

1006.29

985.80

44.5%

-2.0%

Platinum

744.25

2113.50

1220.30

64.0%

-42.3%

Palladium

160.75

478.50

239.10

48.7%

-50.0%

Silver

8.46

19.48

15.90

87.9%

-18.4%

Industrial, USD/lb

Copper

1.28

4.06

2.19

71.4%

-46.0%

Aluminium

0.58

1.53

0.65

12.6%

-57.4%

Lead

0.39

1.04

0.71

84.5%

-31.6%

Tin

4.40

10.82

6.49

47.4%

-40.0%

Nickel

4.01

11.32

6.33

57.6%

-44.1%

Zinc

0.47

0.96

0.71

51.0%

-26.1%

* 12-month

At the corporate level, there is no question that for months if not years, the price outperformance of dollar gold bullion has enabled established producing gold miners to maintain a superior status among global companies. Measured on absolute profit margins, however, there is little, if anything, to compete with the phenomenal margins still obtained by the seaborne iron ore businesses of Vale, Rio Tinto, and BHP Billiton. Seaborne iron ore constitutes one of the best franchises in the world, and goes a long, long way to explaining why the three senior members of the group are also the world's three biggest mining companies, measured by market value (capitalisation).For investors with a good appetite for risk, there are two further themes that have gained strong momentum across the global mining scene. The first one is simply bottom feeding, seen either where a stock has been extremely oversold due to high debt levels, or where it has been particularly smashed up due to country circumstances. Russian miner and steelmaker Evraz encompasses both themes.Debt-laden Evraz was extremely oversold due to hysterical market panic in its home jurisdiction, further weakened by the virtual absence of a retail investment market. Given the ongoing change in sentiment for stock markets in general and materials stocks apparently in particular, Evraz has been performing as a multiple theme recovery stock.Evraz's dollar stock price has risen nearly 600% from its low points. Further on these themes, debt ridden global diversified resources stock Teck and Russian potash miner Uralkali have each bounced by more than 500% from price lows. Bumi Resources, a big Indonesian coal miner, has bounced by nearly 800%. JSC Polymetal has soared on several themes, including Russian jurisdiction, and production of silver and gold.Mining companies have increasingly shown an ability to raise substantial capital outside the banking system. Thus Teck, in spite of a substantial debt load, recently raised USD 4.2bn by issuing term notes over five, seven and 10 years. In one of the biggest equity issues of the year, diversified miner Xstrata raised the equivalent of USD 6.8bn in an issue that was hugely dilutive; the fresh stock was sold for GBP 2.10 a share, way below current trading levels around GBP 7.30 a share. Alcoa, another debt challenged miner, raised USD 788m in a rights issue at USD 5.25 a share; the stock is now changing hands around USD 9.22 a share.

Listed gold stocks have been most commonly seen in equity issues this year; among the larger ones, Newmont raised USD 1.3bn by issuing 34.50m new shares, Kinross raised USD 361m by issuing 20.90m new shares, and Newcrest raised the equivalent of USD 610m by issuing 27.80m new shares. There are mining stocks that were literally sold down to a penny a share, but were soon rerated on one of more positive themes. London-listed Australian gold digger Norseman Gold has risen by more than 2,000% from the penny-a-share level, Century Mining, a Canadian and Peru gold digger, has risen by a similar amount after falling to a Canadian penny. Investors are increasingly prepared to award the meeting of delivery targets, as seen in the extreme cases of African and Australian gold digger La Mancha Resources, where a stock price increase of more than 2,000% has been noted.Investors are equally prepared to bet on what may be considered to be extreme speculative situations; New Dawn has risen by more than 2,000%, not least on the promise that its Zimbabwean gold properties may now start doing something. Great potential discoveries - which need not be in gold - have been rewarded in a good number of cases, not least Azteca Gold; Extract Resources, in Namibian uranium, while great (gold) drill results may also do the job, as seen in the case of Sandfire Resources.The possibly undervalued subsector of iron ore miners has attracted strong recent interest, being most extreme in established London-listed Ukrainian miner Ferrexpo, and London-listed African Minerals, which remains highly speculative on an apparently giant, but low grade, find in West Africa, with stock trading supported by apparently inexhaustible rumours of a takeover. The African Minerals stock price has risen by nearly 2,000% from its low points.Investors are also taking bets on some of the members of the most heavily oversold subsectors; Australia-listed SA Metals, with interests in South African platinum group metals properties, has soared nearly 2,000%, somehow assisted by a recent name change, while Kopane Diamonds and Pangea Diamondfields have risen above their peers in terms of price performance, as has Opti Canada on its premium Canadian oil sands delivery.Finally, an earlier, but persistent theme remains in place, as in potential takeover targets, exemplified by the likes of Greystar, Moto Goldmines, Athabasca Potash, and Osisko.

TOP RISES IN GLOBAL MINING BOTTOM FEEDING

Stock

From

From

Value

price

high*

low*

USD bn

Frontier Mining

GBP 0.08

-35.7%

6200.0%

0.028

New Dawn

CAD 1.27

-36.5%

2440.0%

0.034

La Mancha Resources

CAD 1.00

-7.4%

2400.0%

0.131

Norseman Gold

GBP 0.35

-1.4%

2233.3%

0.087

SA Metals

AUD 0.31

-1.6%

1966.7%

0.075

African Minerals

GBP 1.82

-8.9%

1925.0%

0.560

Century Mining

CAD 0.20

-28.6%

1900.0%

0.031

Australian Solomons

CAD 0.40

-16.7%

1500.0%

0.038

Uranium Energy

USD 2.35

-30.9%

1365.1%

0.109

Ivanhoe Australia

AUD 2.07

-17.2%

1280.0%

0.526

African Copper

GBP 0.10

-77.4%

1257.1%

0.023

Novagold

CAD 5.65

-43.5%

1089.5%

0.950

Azteca Gold

CAD 0.21

-26.8%

925.0%

0.033

Avion Resources

CAD 0.34

-38.2%

871.4%

0.036

Sandfire Resources

AUD 0.49

-29.7%

870.0%

0.033

JSC Polymetal

USD 9.20

-0.5%

820.0%

2.898

Ampella Mining

AUD 0.37

-5.1%

802.4%

0.035

Bumi Resources

USD 0.18

-81.2%

775.0%

3.396

Yukon-Nevada Gold

CAD 0.18

-86.7%

775.0%

0.051

Oceanagold

AUD 1.29

-15.7%

760.0%

0.169

Marum Resources

CAD 0.21

-2.3%

740.0%

0.020

Regis Resources

AUD 0.52

-18.8%

725.4%

0.102

Centerra

CAD 7.30

-21.9%

711.1%

1.460

Paramount Gold

USD 1.75

-16.3%

695.5%

0.109

Ferrexpo

GBP 1.69

-65.1%

686.0%

1.630

San Anton Resource

CAD 0.24

-45.3%

683.3%

0.023

Keegan Resources

USD 2.79

-28.1%

674.4%

0.079

Olympus Pacific

CAD 0.31

-4.7%

662.5%

0.066

Caledon Resource

GBP 0.54

-65.8%

660.6%

0.186

Fresnillo

GBP 7.01

-4.6%

653.8%

8.240

Zhaojin

HKD 14.00

-0.6%

652.7%

0.790

Colossus Minerals

CAD 3.20

-20.0%

644.2%

0.164

CBH Resources

AUD 0.15

-50.0%

625.0%

0.105

Plexmar Resources

CAD 0.18

-33.3%

620.0%

0.027

Guyana Goldfields

CAD 4.35

-19.1%

613.1%

0.237

Kopane Diamonds

GBP 0.09

-42.7%

610.0%

0.025

Extract Resources

AUD 5.32

-3.3%

609.3%

0.987

Western Goldfields

CAD 3.50

0.0%

600.0%

0.441

Tanami Gold

AUD 0.04

-20.5%

600.0%

0.101

Mano River

CAD 0.07

-75.0%

600.0%

0.021

Greystar

CAD 3.68

-42.9%

594.3%

0.179

Minco Silver

CAD 2.06

-45.8%

586.7%

0.060

US Silver Corp

CAD 0.21

-56.4%

583.3%

0.041

Moto Goldmines

CAD 4.50

-8.9%

581.8%

0.439

Evraz

USD 24.90

-77.3%

573.0%

3.050

First Uranium

CAD 6.85

-14.4%

571.6%

0.960

Claude Resources

USD 0.80

-27.2%

568.2%

0.078

Athabasca Potash

CAD 4.99

-46.6%

565.3%

0.171

Camec

GBP 0.125

-80.0%

557.9%

0.574

Bannerman

AUD 1.45

-44.0%

544.4%

0.185

Vimetco

USD 0.83

-91.0%

538.5%

0.182

Sunridge Gold

CAD 0.38

-61.6%

533.3%

0.022

Uralkali

USD 19.91

-75.4%

530.1%

8.459

White Canyon

AUD 0.38

-15.7%

525.0%

0.057

Orissa Sponge

INR 348.10

-26.4%

521.6%

0.148

Berkeley Resources

GBP 0.58

0.0%

521.5%

0.098

Brazauro

CAD 0.62

-29.5%

520.0%

0.049

Braemore

GBP 0.06

-36.1%

515.0%

0.080

Anooraq

CAD 1.34

-60.7%

509.1%

0.230

Teck

USD 15.83

-68.7%

508.8%

7.559

Catalpa Resources

AUD 0.12

-4.2%

505.3%

0.109

Silver Lake Resources

AUD 0.79

-1.9%

503.8%

0.098

Aditya Birla

AUD 0.58

-79.9%

499.0%

0.146

US Gold Corp.

USD 2.26

-24.4%

494.7%

0.237

Mantra Resources

AUD 3.33

-16.8%

494.6%

0.400

Gryphon Minerals

AUD 0.35

-14.6%

493.2%

0.037

A-CAP Resources

AUD 0.47

-46.6%

487.5%

0.048

Niger Uranium

GBP 0.22

-14.7%

480.0%

0.020

Queenston Mining

CAD 4.40

-4.6%

478.9%

0.234

Century Aluminium

USD 6.01

-92.1%

477.9%

0.446

Golden Star

USD 2.28

-34.5%

470.0%

0.498

Archipelago

GBP 0.11

-57.5%

462.5%

0.056

Mercator

CAD 1.62

-87.0%

458.6%

0.214

Cambrian Mining

GBP 0.60

-82.6%

458.1%

0.116

Ridge

GBP 1.14

-10.6%

442.9%

0.172

Carpathian Gold

CAD 0.27

-46.0%

440.0%

0.052

Pangea Diamondfields

GBP 0.02

-96.0%

440.0%

0.059

Augusta Resources

USD 2.10

-69.8%

438.5%

0.186

Opti Canada

CAD 3.28

-87.1%

437.7%

0.594

High River

CAD 0.22

-88.7%

437.5%

0.117

Homeland Energy

CAD 0.22

-89.5%

437.5%

0.055

Perilya

AUD 0.46

-46.5%

435.3%

0.146

Cluff Gold

GBP 0.55

-37.1%

434.1%

0.105

Mega Uranium

CAD 2.05

-19.6%

425.6%

0.355

Shakhta Komsomolets

UAH 5.50

-59.6%

423.8%

0.242

Titan Uranium

CAD 0.57

-24.0%

418.2%

0.028

Herald Resources

AUD 0.51

-82.9%

410.0%

0.084

Osisko

CAD 7.11

-1.5%

407.9%

1.678

Iamgold

USD 11.27

-1.3%

407.7%

4.114

Huolinhe

CNY 27.13

-7.6%

403.8%

4.393

Anatolia

CAD 3.26

-10.4%

401.5%

0.346

Hunan

HKD 2.00

-30.8%

400.0%

0.421

Iron Ore Holdings

AUD 0.48

-48.7%

400.0%

0.045

Pan Australian

AUD 0.39

-62.1%

400.0%

0.712

Mansfield Minerals

CAD 0.70

-78.1%

400.0%

0.029

Andean

AUD 2.12

-0.9%

398.8%

0.795

Citic Pacific

HKD 18.12

-47.2%

395.1%

8.524

Dragon Mining

AUD 0.07

-31.0%

392.9%

0.041

Perseus Mining

AUD 0.98

-35.3%

392.5%

0.182

Kalahari Minerals

GBP 1.27

-2.7%

391.3%

0.408

Averages/total

-37.1%

737.5%

73.216

Weighted averages

-59.0%

528.4%

* 12-month

 

Note: USD 20m market value applied as cutoff

Source: market data; table compiled by Barry Sergeant