It's time for the annual fest of figures and charts to review a selection of the key trends in 2007 for commodities and mining shares.
And the figures for the year demonstrate that there were indeed plenty of opportunities to be had in the sector despite the credit crisis and general market turmoil. RIO was certainly a lucky ticker as shareholders in Vale which has the RIO ticker on the New York stock exchange have been able to watch their investment more than double in a year while shareholders in Rio Tinto, which has the RIO ticker on the London and Australian exchanges, have likewise seen close to a doubling.
More generally, the figures suggest that commodities and the mining sector have significantly outperformed the overall economy, though of course there have been winners and losers. The winners have tended to be producers rather than explorers, and majors rather than juniors.
Stock Market Trends
The world's stock markets rose 5% in local currency and 10% in dollars over the year according to indices published by MSCI Barra. On average the emerging markets, which rose 37% in dollars, far outperformed the G7 countries which were up by 6% in dollars and just 2% in local currency.
Growth, at 86%, was particularly spectacular in Peru, while three of the BRICs were in the top five markets with Brazil up 75%, India 72%, and China 63%. Germany was the fastest growing G7 market, up 33% on the year for a dollar investor (20% in euros).
However, equity indices fell in several markets in both local currency and dollar terms, with Venezuela, Ireland, Belgium, Sri Lanka and Japan at the bottom of the list.
Despite the year's reputation as a roller-coaster, both the S&P500 and the FTSE 100 indices traded within a relatively narrow 15% range throughout the year.
Trends in Mining Indices
The mining indices meanwhile have, in general, greatly outperformed the overall stock market indices which took a battering from the financial and retail sectors. The FTSE Global Mining index, for example, is up by more than 60% on the back of the strength in the major diversified mining companies, while the gold share indices such as AMEX Gold Bugs index, the FTSE Gold mines index and the Philadelphia Gold and Silver sector index are all up by more than 20% over the year.
Large caps appear to have done better than mid caps which in turn seem to be performing better than small caps when taken as a group. As Ernst & Young say in a recent report on its Mining Eye index, "the market is still showing a preference for mineral production over mineral promise."
The Mining EYe index, which rose by around 20% on the year is based on the performance of the top 20 mining companies on London's Alternative Investment Market which was established for young growing companies. The companies in the index are mid-caps with a market capitalisation between $400 million and $2 billion.
Juniors meanwhile have had a far worse year than the majors as highlighted in a recent Resource Investor article by David DesLauriers, "Numbers Reveal That Juniors Are Due for a Major 2008 Run," which pointed out, for example, that the TSX Venture index finished the year several percent down on the start.
Commodity prices
Commodity prices rose by around 30% during 2007 if the weightings in the Rogers International Commodity Index are used. Commodities in the energy complex led the way, up around 50% over the year while agricultural commodities were up 20% and metals 11%.
For the year as a whole, oil enjoyed the biggest price rise, up 56% on the back of rising demand, falling supplies from non-OPEC producers and geo-political tensions. The fastest growing metal was lead, which began the year at $1,770/tonne then almost broke $4000/tonne in October when LME stocks fell to one day's global consumption before falling back to its current level of around $2,500.
The precious metals all remain at or close to their peaks, with platinum up 37% and gold up 32%. Prices of aluminium, nickel and zinc all fell during the year. For more detail on the factors underlying the trends in each commodity see today's article "Commodities Review of 2007 & Preview of 2008."
The recent bull run for the precious metals began in early September shortly after the onset of the turmoil in the financial markets.
By contrast prices of all the major base metals except for tin have been falling since September as supply in general has picked up while concerns about prospects for demand from the U.S. have intensified.
Mining company share prices
Last but not least comes the table of trends in selected mining shares. On average prices for the 63 shares listed below have risen by 49% though the average is raised by the stellar performance of the diversified majors, which as a group rose 66% during 2007.
It was certainly a year in which profits could be made by buying on the dips. The range on more than 20 companies in the table was more than 100% while even for the least volatile share, Petra Diamonds, the range was 42%.
Please, as always, note the caveats associated with this table. With 2,000 companies world-wide it is not comprehensive. It is not rigorously categorised as many mines and companies produce more than one commodity, and it is not adjusted for exchange rate movements. All trends are shown in local currency.
Courtesy: http://www.resourceinvestor.com