FTSE miners emerge from a hole

<p>The final quarter of 2016 is showing the strongest signs yet that global miners have dug themselves out of a hole.</p>

The final quarter of 2016 is showing the strongest signs yet that global miners have dug themselves out of a hole.

2017 even looks set to bring the first increases in spending by the FTSE’s biggest miners, Glencore, BHP, Rio Tinto for half a decade.

That and the so-called ‘reflation rally’ stoked by investor hopes that President Donald Trump will trigger a fiscal renaissance, have refuelled an advance of mining shares despite several having gained by triple-digit percentages in 2016. After spending fell by two-thirds from a 2012 peak of $21.5bn, according to S&P Global Market Intelligence, Australia’s Association of Mining and Exploration Companies says drilling on new ground, was up 75% percent in last year’s third quarter from the second quarter alone. The rebound of most metals prices from late-2015 lows is a partial explanation, though brutal cost and debt reductions across the board have arguably been more important. Over the last year or so, such exercises have gone a long way toward reassuring investors that the new cycle has better profit potential.

Earlier this week, Randgold Resources unveiled a 72% surge in cash flow for the fourth quarter, overshooting its target for the year and enabling a 52% hike in the annual dividend.

On Wednesday 8th February, Rio Tinto is expected to report its first rise in quarterly revenues since December 2011, with a 17.1% rise to $19.7bn.

BHP Billiton is forecast to report, on 21st February, its first rise in quarterly revenues since June 2009, with a 29.5% rise to $20.35bn.

Glencore will report on 23rd February, with its revenue decline expected to slow to 6.8%, the softest hit since June 2013.

 

 

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.