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Home / Special Reports / Miners Reporting Imminently

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4 February 2018

Miners Reporting Imminently

The mining sector has ventured a long way from the dark days of late 2015 and early 2016. UK miners find their shares trading at pre-commodity slump levels, just 24 months after falling to their lowest levels in a decade. Some are now even trading at 10-year highs.

How has the sector managed such a stellar recovery, and where might miners’ shares go from here?

This report delves deeper into the sector to explain the wide range of drivers impacting the sector, and previews all-important upcoming full-year results.

Dogged dollar and climbing commodities

A prominent market theme of the past 12 months has been persistent US dollar weakness, with the global reserve currency falling to its lowest level since December 2014 in the early weeks of 2018.

Perceptions of increased protectionism under the pro-America Trump administration, in combination with central banks across the globe playing catch up to the US Federal Reserve, have dented sentiment for the greenback, with deep consequences for miners.

Dollar-denominated commodities have received a tremendous boost from the dollar weakness, a reaction that has also helped the miners themselves.

Copper traded a 3-year high in December 2017 and, despite retreating marginally as the dollar stabilises, remains within touching distance of those highs.

Whether key commodities like copper continue to trade around multi-year highs depends on the buck.

But already, there are signs the dollar might be out of the doldrums and on course for a rosier 12 months.

But will the greenback regroup?

Whilst 2018 hasn’t seen the dollar recovery expected after tax reform was passed last year, it also hasn’t seen protracted decline we saw in January 2017.

Tax reform under his belt, the President now has his first legislative victory and the fresh confidence that comes along with it. Next on the agenda is an enormous $1 trillion infrastructure spending plan, a key pillar of Trump’s presidential campaign agenda.

The policy focus of the administration, as well as the outcome of November’s mid-term elections, will be a major driver for the dollar, and subsequently miners.

Changing guard, corruption and China

With major mining operations in South America South Africa and Australia, amongst others, UK miners are exposed to a plethora of external factors.

Both South African and South American political spheres are undergoing a dramatic overhaul. The former is planning for President Zuma’s succession after nine years in charge, while corruption trials in Brazil have fuelled South American angst.

Meanwhile Australia, one of the most exposed states in the world to China, and could be subject to a A$140bn (£80.5bn) hit to national income should the Chinese economy hit a widely touted hard landing.

These themes will be closely watched in 2018. Mining is a global business and, as such, global events like these will continue to influence the sector this year.

Overleaf, we reveal the reporting dates of the UK’s largest mining stocks and dissect how shares have fared over the course of the past 12 months.

Page: 01

Anglo American                FY results 22/02

The worst hit miner during the commodities downturn – trading all-time lows in January 2016 – Anglo has enjoyed one of the most impressive share price recoveries in history, having rallied over 700% from those lows to trade 5-year highs in 2018. Shares rallied 0.8% after January’s Q4 production update and, more notably, rallied 3.2% in July after half-year results. Will the shares enjoy another positive reaction to the full-year print?

Antofagasta                       FY Results 13/03

The Chilean copper miner has followed a consistent trading range since Summer 2017 after a breakout from 868p resistance. Whilst trading just shy of 2017’s fresh 5-year highs of 1071.5p, Antofagasta’s results this year have been mixed. A 2% rally after Q2 results was followed by 4.4% and 0.8% declines after Q3 and Q4 production.

BHP Billiton                       HY Results 20/02

One of two dual-listed Australian miners – and the largest on the UK Index – Billiton is the only company releasing half year figures. Having rallied 2.1% following August’s FY results, and 0.4% a year ago, will it be three-in-a-row?

Fresnillo                              FY Results 27/02

Of the two UK Index precious metal miners, silver-focused Fresnillo has endured some topsy-turvy reactions to trading statements over the past 12 months. Although shares rallied 3.7% after Q4 production in January, shares fell 2.3% and 2.6% after Q3 production and Q2 results, respectively. Which reaction will FY results mirror?

Glencore                             FY Results 21/02

The miner and commodity trader formed after the Xstrata merger is one on the most popularly traded UK 100 stocks and another to enjoy a meteoric recovery since late 2015 (+500%). Glencore’s shares fell 1% after the release of FY production figures earlier in February, but will FY results emulate last year’s 1.7% post-results rally?

Randgold Resources      FY Results 05/02

The premier UK gold miner, Randgold has been a narrowing patter since trading all-time highs after the UK’s Brexit vote. A driver behind this may be the mixed share price reaction to results of late. Having rallied an impressive 4.2% a year ago and 2.4% after Q2 results in August, shares fell over 7% back in November.

Rio Tinto                             FY Results 07/02

The second dual-listed Miner, Rio Tinto is also the second largest miner by UK 100 weight. It’s been a difficult 12-months results-wise, with shares falling 2.8% after Q2 results and 2.0% in January after Q4 production.

Over the page, we look deeper into the technicals behind these stocks. Found this report informative? Our research team sends similar publications daily on indices, commodities and other blue-chip equities. To discover more, sign up here.

Page: 02

Anglo American (AAL)

Will Anglo rally to 2018 highs of 1795p (+5.9%) or fall back to support at 1520p (-10%)?
  • Shares have retreated from 2018 highs, however found 1675p support. Will they break down or bounce?
  • Relative Strength Index (RSI) has bearishly crossed 50, while Stochastics have turned oversold
  • Momentum has turned negative and is at the lowest level since December 2017
  • Brokers are negatively skewed, with just 40% of brokers holding a 12-month target above current level
Broker Consensus: 36% Buy, 48% Hold, 16% Sell

Bullish: Macquarie, Outperform, Target 2100p, +24% (30 Jan 18)

Average Target: 1642.4p, -3.1% (1 Feb 18)

BearishLiberum, Sell, Target 800p, -53% (1 Feb 18)

 

Pricing data sourced from Bloomberg on 1 February. Please contact us for a full, up to date rundown.

Page: 03

Antofagasta (ANTO)

Will Antofagasta return to 2017 highs of 1072p (+17%) or fall back to June 2016 lows of 745p (-19%)?
  • Shares have retreated from resistance at 1048p towards 900p support. Will they break down or bounce?
  • RSI and Stochastics have both turned oversold for first time since December 2017
  • Momentum remains negative but is off its worst levels of 2018
  • Brokers cautiously positive, with just over 50% forecasting the price will rise over the next 12 months
Broker Consensus: 23% Buy, 31% Hold, 46% Sell

Bullish: Jefferies, Buy, Target 1250p, +37% (24 Jan 18)

Average Target: 916.4p, +/-0.0% (1 Feb 18)

Bearish: Morningstar, Hold, Target 410p, -55% (24 Jan 18)

 

Pricing data sourced from Bloomberg on 1 February. Please contact us for a full, up to date rundown.

Page: 04

BHP Billiton (BLT)

Will BHP Billiton rally to 2011 highs of 2650p (+70%) or fall to 2015 lows of 575p (-63%)?
  • Shares have met a duo of resistance around the 1600p mark. Will they retreat or will they break out?
  • RSI has bearishly crossed 50, while Stochastics are approaching oversold
  • Momentum remains negative but is off its worst levels of 2018
  • Brokers are negatively-leaning, with just 40% holding a 12-month target price above current level
Broker Consensus: 23% Buy, 61% Hold, 16% Sell

Bullish: Macquarie, Outperform, Target 2000p, +28% (26 Jan 18)

Average Target: 1537.7p, -1.5% (1 Feb 18)

BearishLiberum, Sell, Target 800p, -49% (1 Dec 17)

 

Pricing data sourced from Bloomberg on 1 February. Please contact us for a full, up to date rundown.

Page: 05

Fresnillo (FRES)

Will Fresnillo rally to 2016 highs of 2050p (+52%) or fall to 2015 lows of 570p (-58%)?
  • Shares have been narrowing between 1250p and 1550p. Which way will they break?
  • RSI has failed to cross back above the pivotal 50 mark, while Stochastics hover around oversold
  • Momentum has been negative for the majority of 2018, however is off its worst levels
  • Brokers are overwhelmingly positive, with 80% forecasting the price to rise over the next 12 months
Broker Consensus: 23% Buy, 71% Hold, 6% Sell

Bullish: Scotia Capital, Outperform, Target 1700p, +26% (24 Jan 18)

Average Target: 1456.9p, +8.1% (11 Jan)

Bearish: Goldman Sachs, Neutral, Target 1150p, -15% (7 Dec 17)

 

Pricing data sourced from Bloomberg on 1 February. Please contact us for a full, up to date rundown.

Page: 06

Glencore (GLEN)

Will Glencore return to 2018 highs of 417p (+4.0%) or fall to 2018 lows of 388p (-3.2%)?
  • Shares have traded near 6-year highs in 2018 before retreating. Will they fall further or make new highs?
  • RSI has retreated from overbought towards the pivotal 50 mark alongside Stochastics
  • Momentum has turned negative having failed to overcome falling highs resistance
  • Brokers are positive, with three quarters projecting a 12-month price target above current level
Broker Consensus: 67% Buy, 23% Hold, 10% Sell

Bullish: NOAH Capital Markets, Buy, Target 586.5p, +46% (26 Jan 18)

Average Target: 446.6p, +11% (1 Feb 18)

BearishLiberum, Sell, Target 300p, -25% (1 Feb 18)

 

Pricing data sourced from Bloomberg on 1 February. Please contact us for a full, up to date rundown.

Page: 07

Randgold Resources (RRS)

Will Randgold rally to 2016 highs of 9840p (+39%) or fall to 2016 lows of 150p (-23%)?
  • The gold miner has been narrowing for the past 18 months. Will shares break lower or higher in 2018?
  • RSI continues to hover around 50 having not turned overbought or oversold since December 2017
  • Momentum remains around zero, while Stochastics trade on the bearish side of 50
  • Brokers are very positive, with no ‘Sell’ ratings and 80% projecting the price to increase over 12 months
Broker Consensus: 55% Buy, 45% Hold, 0% Sell

Bullish: SBG Securities, Buy, Target 12500p, +77% (4 Aug 17)

Average Target: 7833.9p, +10% (1 Feb 18)

Bearish: RBC Capital Markets, Sector Perform, Target 6600p, -6.7% (20 Jan 18)

 

Pricing data sourced from Bloomberg on 1 February. Please contact us for a full, up to date rundown.

Page: 08

Rio Tinto (RIO)

Will Rio Tinto return to 2018 highs of 4190p (+6.7%) or fall to 3550p rising lows support (-10%)?
  • Shares have traded 7.5-year highs in 2018 before retreating. Will they fall further or make new highs?
  • RSI is hovering on the bearish side of 50, while Stochastics close to oversold
  • Momentum remains negative, however is well off its worst levels of 2018
  • Brokers are positive, with over three quarters projecting a 12-month price target above current level
Broker Consensus: 55% Buy, 35% Hold, 10% Sell

Bullish: Macquarie, Outperform, Target 4900p, +25% (26 Jan 18)

Average Target: 4157.3p, +5.9% (1 Feb 18)

Bearish: Liberum, Sell, Target 2750p, -30% (1 Feb 18)

 

Pricing data sourced from Bloomberg on 1 February. Please contact us for a full, up to date rundown.

Page: 09

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Page: 10

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Page: 12

This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

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