Surging prices for commodities, stronger balance sheets and rising inflation have lured back to mining stocks generalist investors that for years shunned the sector, data shows.
Shares in diversified mining companies Rio Tinto, BHP, Anglo American and Glencore have doubled in the last year, as policy support measures in advanced economies in response to the COVID-19 pandemic stoked inflation.
Commodities serve as a hedge against inflation, meaning their prices are expected to stay strong, and at the same time the transition to a low carbon economy and channelling of stimulus funds into infrastructure is generating demand for raw materials.
The size of natural resources mutual and exchange-traded funds tracked by Refinitiv Lipper data exceeded $70 billion by the end of April for the first time since September 2018 at $72.4 billion. (Graphic: Assets and flows of funds)
Many generalist investors – or money managers whose focus is not solely on mining companies – fled the sector when a commodity boom crashed in 2015 as China’s appetite for raw materials slowed down.
“The inflation fears and metals price action has brought investors back to mining stocks,” said London & Capital head of equities Roger Jones, whose fund holds mining stocks.
A Bank of America survey of fund managers published in May found that a net 21% of European investors participating in it were overweight metals and mining versus a net 56% that said they were underweight a year ago.
The survey found fund managers were underweight defensive sectors such as utilities and pharma.
This is not only visible in Europe, as several hedge funds have piled into Canada-listed Teck Resources Ltd, for example, U.S. regulatory filings show. (Graphic: Miners vs FTSE, https://fingfx.thomsonreuters.com/gfx/ce/ygdpzognwvw/minersvsftse.JPG)
AVOIDING BOOM AND BUST
Miners have learnt a hard lesson since the last boom, when they overpaid by billions to buy assets, sometimes in complex jurisdictions or difficult geologies.
By maintaining discipline on costs, spending and acquisitions, they cut debt and gave shareholders dividends that have become loftier as commodity prices rose.
Prices for copper, which is expected to be one of the biggest beneficiaries of the lower carbon economy, hit a record this month, while battery minerals nickel, lithium and cobalt have also jumped.
Sell-side analysts have hailed the latest rally as the beginning of a supercycle, but some fund managers caution against too much enthusiasm, as supply disruptions caused by the COVID-19 restrictions ease, potentially curbing prices.
“Supply chains are still not working as smoothly because of COVID lockdowns, so we have to wait until there is a normalisation to get a better idea of what is really driving commodity prices,” said Ben Ritchie, head of European equities at Aberdeen Standard Investments.
Fund managers also said China was not consuming as much metal as it was during a 2000-2008 supercycle, and mining stocks are trading on low multiples compared to tech for example, which suggests broader scepticism that prices can be sustained.
Another concern for investors has been the level of risk associated with mining that has led to environmental disasters and legal action.
As ESG (environmental, social and governance) criteria have shot to prominence, miners have drawn up sustainability reports and ethical and green targets that may reassure some investors.
“ESG has been a challenge for miners to adapt to, but it is arguably the best thing that has happened to the mining sector,” said Janus Henderson fund manager Tal Lomnitzer, whose funds hold Anglo American and copper miner Freeport-McMoRan.
“Decarbonisation should bring in those investors who would otherwise avoid the sector.”
(Reporting by Zandi Shabalala and Clara Denina; additional reporting by Maiya Keidan in Toronto. Editing by Barbara Lewis)
EDMONTON – RCMP say a second suspect has been arrested in the killing of an Alberta county worker.
Mounties say 28-year-old Elijah Strawberry was taken into custody Friday at a house on O’Chiese First Nation.
Colin Hough, a worker with Rocky View County, was shot and killed while on the job on a rural road east of Calgary on Aug. 6.
Another man who worked for Fortis Alberta was shot and wounded, and RCMP said the suspects fled in a Rocky View County work truck.
Police later arrested Arthur Wayne Penner, 35, and charged him with first-degree murder and attempted murder, and a warrant was issued for Strawberry’s arrest.
RCMP also said there was a $10,000 reward for information leading to the arrest of Strawberry, describing him as armed and dangerous.
Chief Supt. Roberta McKale, told a news conference in Edmonton that officers had received tips and information over the last few weeks.
“I don’t know of many members that when were stopped, fuelling up our vehicles, we weren’t keeping an eye out, looking for him,” she said.
But officers had been investigating other cases when they found Strawberry.
“Our investigators were in O’Chiese First Nation at a residence on another matter and the major crimes unit was there working another file and ended up locating him hiding in the residence,” McKale said.
While an investigation is still underway, RCMP say they’re confident both suspects in the case are in police custody.
This report by The Canadian Press was first published Sept. 13, 2024.
RICHMOND, B.C. – The Integrated Homicide Investigation Team says the 26-year-old son of a man found dead on British Columbia’s Sunshine Coast has been charged with his murder.
Police say 58-year-old Henry Doyle was found badly injured on a forest service road in Egmont last September and died of his injuries.
The homicide team took over when the BC Coroners Service said the man’s death was suspicious.
It says in a statement that the BC Prosecution Service has approved one count of first-degree murder against the man’s son, Jackson Doyle.
Police say the accused will remain in custody until at least his next court appearance.
The homicide team says investigators remained committed to solving the case with the help of the community of Egmont, the RCMP on the Sunshine Coast and in Richmond, and the Vancouver Police Department.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, have broken off without an agreement following 15 hours of talks.
Joe McCann, president of Amalgamated Transit Union Local 1724, says they stayed at the bargaining table with help from a mediator until 2 a.m. Friday and made “some progress.”
However, he says the union negotiators didn’t get an offer that they could recommend to the membership.
McCann says that in some ways they are close to an agreement, but in other areas they are “miles apart.”
About 600 employees of the door-to-door transit service for people who can’t navigate the conventional transit system have been on strike since last week, pausing service for all but essential medical trips.
McCann asks HandyDART users to be “patient,” since they are trying to get not only a fair contract for workers but also a better service for customers.
He says it’s unclear when the talks will resume, but he hopes next week at the latest.
The employer, Transdev, didn’t reply to an interview request before publication.
This report by The Canadian Press was first published Sept. 13, 2024.
