Tag Archive for Previous Year

Mining Stocks: Will the Downturn Last?

Over the last twelve months mining stocks have substantially underperformed the market.

In fact, the Standard and Poor’s Metals and Mining select industry index (INDEXSP: SPSIMM) is off 35% in the past year, while the overall market is up 2.5%.

Admittedly commodities prices are down, but only by 14% in the last year. Meanwhile, the cost of some commodities — notably gold prices — are much higher than they were.

Given the buoyancy of global monetary policy, this is surprising. For investors, the big question is: will the downturn in mining stocks last?

It truth, though, when you look more closely at operating numbers, the weakness in commodity shares is easier to explain.

Mining Stocks: Breaking Down Barrick Gold

For example, Barrick Gold (NYSE:ABX), a gold and copper miner that is generally well regarded, posted first quarter earnings which were up just 3% from the previous year. That was a surprisingly weak performance given that its gold sales price was up 22% — even though its copper price realized was down 11%.

However, gold cash mining costs were up 25% and copper cash mining costs were up a startling 66%. So even though copper production and sales were also up sharply, margins on those sales were down 43%.

In other words, even though Barrick enjoyed a favorable operating quarter with good prices, mining costs for both gold and copper were up so sharply that Barrick enjoyed little benefit from this success.

The same picture is clearly seen around the mining sector, and indeed in the related energy sector.

Strong sales prices over the last few years have had two effects.

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Plosser Says Rates Should Rise Before 2014 FOMC Target Date

Philly Fed President Charles Plosser said in a speech in San Diego: “You may know that I dissented from the FOMC decisions in August and September because it was not clear to me that increasing monetary policy accommodation was appropriate then. After all, inflation was higher and unemployment was lower relative to the previous year,…

Listed House Sale Closings Rose 74,000 in March, Prices up 5% in Month, 2.5% in Year

The NAR reported today that their members settled 361,000 house sales in March (actual, not seasonally manipulated), up 74,000 from February. The median price rose 5.27% versus February and was up 2.5% versus March 2011. This was the largest monthly percentage price gain since June 2005. The year over year gain was the first significant…