David Hoffman reports that a rebound in commodity prices helps mining equities bounce back from Q4 2015 lows. The Mining Eye gained 9% during Q1 2016, despite a difficult January period, reflecting an improvement in sentiment from stabilizing commodity prices.
The Mining Eye, however, underperformed more than both the Canadian Mining Eye and FTSE Miners Index, which rose by 26% and 23%, respectively, during Q1-2016, partly owing to the differences in price movements relative to equity value weightings.
Iron ore, gold and copper increased by 21%, 16% and 3%, respectively, during 1Q, albeit from low levels, reflecting short-term positioning (iron ore) or in response to increased market volatility during Q1 (gold).
Within the Hoffman Mining top 20 list, Pan African Resources recorded a 74% price gain in Q1, following a y-o-y increase in gold production in conjunction with a rally in gold equities.
1. Fundraising on AIM continues to remain subdued,
2. Q1 represented a slightly better quarter than Q4, with 54 M pounds raised through a series of small equity placements, representing 7% of total funds raised from AIM,
3. Funds raised were typically less than 2 million pounds(Sterling), with Metals Exploration and Rare Earth Minerals raising the largest amounts in March, and
4. No new mining companies were listed on AIM during Q1, though two companies were de-listed, having earlier been suspended during H2 2015.
Difficulties continue to remain with preserving liquidity paramount. Despite an improving Q1, companies continue to struggle at current price levels, where reducing cash outflows and optimizing working capital remain important.
Excess supply and significant inventories are also problematic for most commodities, which may limit any continued short-term improvement in prices.
Bond yields and credit default swap (CDS) spreads have fallen among large diversified miners. However, companies should continue to expect the access to capital to remain limited.
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