The Business of Mining

Top Stories of the Week:

• Glencore mine in Bolivia nationalized
  • Bolivia nationalizes the Colquiri zinc and tin mine, one of 5 of Glencore’s assets in the country. The government promises to give a ‘fair compensation for equipment.
  • The nationalization comes after several weeks of labor conflicts between Colquiri’s workers and Glencore’s local subsidiary
  • Sources: Wall Street Journal; Glencore press release; La Prensa Bolivia
• Rio Tinto invests $4bln more in Pilbara region
  • Rio Tinto has decided to spend an additional $3.7bln in the Pilbara region as part of its long-term investment plan.
  • $2.0bln of the funds will be used for infrastructure enhancements to allow the company to meet its output targets. The other $1.7bln will be used to extend the life of one of the largest mines in the area.
  • Sources: Rio Tinto press release; Financial Times; Fox Business
• Media stress commodity price uncertainty
  
  • The disparity between performance of global mining stocks and metal prices is triggering debate in banking world and media about the potential impact of a further slowdown of the global economy.
  • Sources: Mining Weekly; Financial Times

  Trends & Implications:

  
  • The uncertainty about short-term economic developments in both OECD countries and developing economies, most notably China, is causing share prices across the mining industry to lag the current performance of both metal prices. The uncertainty for short-term prospects apparently also affects the long-term outlook for the industry, making investors believe price and profit levels can’t be sustained. As a result, Price/Earnings (PE) ratios are dropping, causing market capitalization to go down despite good company performance.

  ©2012 | Wilfred Visser | thebusinessofmining.com