Gold, Copper Lift UK Miners

As gold reaches new record highs, mining stocks have experienced a good run, with some seeking better opportunities.

Keeping Busy on the Ground

Miners listed in the UK have been making headlines lately, pushing the FTSE mining index to new year-to-date highs alongside a general appreciation in commodities. While gold has made headlines for setting record highs due to market uncertainty and inflation concerns, copper prices have also seen notable gains in the first two months of the year. Iron ore also recovered above $100 per tonne, supporting Australian-based firms trading in the UK, such as BHP.

However, not all headlines have been positive. BHP’s earnings showed a six-year low in profits earlier in the week when it reported and was forced to cut its dividend. Yet, it still provided an optimistic outlook, saying that central bank easing and improving economic conditions in China could increase iron and copper demand. The recent price action in these two commodities seems to align with this outlook. The company also noted that it is now focusing on organic growth after failing to acquire Anglo American.

Deals and Moves

Anglo American also reported earnings, with an eye-watering $3.1 billion loss primarily due to an anticipated write-down at De Beers. However, investors were more interested in and welcomed the concurrent announcement that the company would partner with Chile's state-owned Codelco to jointly operate the Andina and Los Bronces mines. What was not seen as good news for the London market, however, was reports that one of the top-listed British firms, Glencore, is considering listing in New York in an attempt to secure better share prices.

This would add to the growing list of companies relocating overseas, as liquidity conditions in London do not seem ideal. BHP had agreed to do so a couple of years ago, and Rio Tinto also received requests to abandon its dual UK and Australia listing in favour of listing Down Under. The world's second-largest miner also reported earnings earlier in the week and, like its peer BHP, was impacted by lower ore prices. However, investors appeared more pleased with Rio Tinto's expansion projects, and the company also echoed the same optimism about a recovery in iron ore prices this year.

Rio Tinto Readies for Breakout?

Rio Tinto has been consolidating over the past three to four years in what seems to be forming a narrowing symmetrical triangle. Near the tightest point in years, Rio may be poised for an upward breakout past 5500 and 5900 if the 4620 and 4500 hold firm, with the recapturing of 6400 opening the door to new all-time highs above 6800. Conversely, sliding under 4350 would suggest a bearish breakout, paving the way to 4k and perhaps lower territories.

Source: SpreadEx / RIO TINTO

Key Takeaways

The UK’s mining sector has seen a resurgence due to upbeat commodity prices but some companies have faced challenges. With expectations of demand increases and a potential for a further recovery in prices, the overall outlook remains optimistic. However, concerns persist about liquidity conditions in London, and some firms are considering relocating.