Mining companies have weathered a trough and begun renewing interest among investors after cost reductions enhanced valuations, said Evy Hambro, who runs the $7.3 billion World Mining Fund at BlackRock Inc.
Mining stocks probably reached the bottom around June, following three consecutive years of being bested by the broader equity market, Hambro said today at a media briefing in Singapore. New managements at major mining companies including BHP Billiton Ltd., Rio Tinto Group, Anglo American Plc and Glencore Xstrata Plc have improved performances, he said.
“It’s pretty clear we are seeing a base forming in the market,” said Hambro, who is overweight on copper and iron ore and is increasing his holdings in nickel. “We had an amazing set of results in February when the companies outperformed relative to expectations.”
BHP Billiton, Glencore Xstrata and Rio Tinto are among miners trimming costs and headcount after prices from copper to nickel slumped in the past three years, reducing revenue. Capital expenditure in mining is falling and moving markets including copper into a deficit, Hambro said.
The Bloomberg World Mining Index lost 26 percent in 2013, compared with a 20-percent gain in the MSCI All-Country Index tracking equities. Comex copper futures have averaged $3.107 a pound since at least 2005, a level which Hambro described as “strong.”
“The shares haven’t been weak because commodity prices are weak,” Hambro said. “They have been weak because the management had been doing a bad job but we are now seeing the management doing a much better job.”