By Christian Moess Laursen
European miners are scheduled to report second-quarter and half-year results over the next four weeks. Strong gold and silver prices are set to provide boons to earnings for producers of the precious metals, while weak iron-ore prices could hamper those of diversified miners. Here is what you need to know.
Shares in Europe-listed precious-metals miners have performed strongly this year, led by Hochschild Mining's stock jumping around 66% on gold and silver prices climbing around 16% and 22%, respectively. Similarly, strong copper prices have boosted shares in Antofagasta by nearly 15% this year. On the other hand, shares in diversified majors Rio Tinto and Glencore have declined around 16% and 7%, respectively.
The European mining and metals sector has underperformed versus the wider European market so far this year, with the Stoxx Europe 600 Basic Resources down around 4% while the Stoxx 600 is up by around 8%.
WHAT TO WATCH
--Quarterly earnings of gold and silver miners are likely to jump on significantly higher average prices. Gold prices were 12% higher on average through the quarter, while silver prices were 23% higher compared with the first quarter, according to RBC Capital Markets. This will result in an inflection point for financial results, with senior producers forecast to post 45% higher earnings on average compared with the first quarter, RBC estimates. The Canadian bank expects capital allocation to be a main discussion point in the last half-year as a result. Endeavour Mining and Centamin are among Berenberg's top picks for gold exposure.
--Improved prices of base metals such as copper, zinc and aluminum, and cost inflation returning to normal will lead to stable margins year-on-year, offsetting weakness in other metals for the diversified mining companies, RBC said in a recent research note. Copper has been one of the top performing metals this year, hitting two-year highs in May on tight supply, increasing demand and sanctions on Russian metals. While sentiment has cooled from May, Berenberg analysts still see the narrative of rising base metals demand for the green transition remaining, they said in a recent note.
--Analysts at RBC and Berenberg hold a cautious view on iron ore. RBC said in a recent note that it expects iron-ore prices to fall 15% over the coming year, and so keeps a preference toward miners with lower exposure to the dynamics of that market. It has Glencore and Norsk Hydro as top picks. Meanwhile, Berenberg recently downgraded its share rating on Rio Tinto--a top iron-ore exporter--to hold, citing a soft iron-price outlook due to a lack of meaningful support from China amid a weak housing sector and concerns that protectionist policies against China are intensifying. Investors could look for possible comments on the companies' outlook for China stimulus.
WHEN COMPANIES ARE SCHEDULED TO REPORT:
--Centamin: July 25
--Anglo American: July 25
--Fresnillo: July 30
--Rio Tinto: July 31
--Endeavour Mining: July 31
--Glencore: Aug. 7
--KGHM: Aug. 13
--Antofagasta: Aug. 20
--Hochschild Mining: Aug. 28
Write to Christian Moess Laursen at christian.moess@wsj.com
(END) Dow Jones Newswires
July 23, 2024 08:17 ET (12:17 GMT)
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