Mining Losses Can't Stop Share Rally as Painful Decisions Reward

Billion-dollar writedowns, slumping earnings and heavy financial losses –- not the typical backdrop to a rally in mining stocks.

But that was the case Thursday, as shares of Freeport-McMoRan Inc. and mining-equipment maker Caterpillar Inc. jumped after reporting earnings that were worse-than-expected. Nucor Corp. rallied even as sales missed analysts’ estimates, while Teck Resources Ltd. rose after saying it was taking an impairment charge of C$2.2 billion ($1.68 billion). Freeport recorded a $3.7 billion net charge, mostly related to the company’s oil and gas division.

Investors had reason to hope that pain this quarter will help stem future losses. The Bloomberg World Mining Index jumped 1.4 percent, the biggest gain since Oct. 14.

“It’s a miss and a charge in a kitchen-sink quarter to get rid of all the bad news,” Ivan Feinseth, chief investment officer at Tigress Financial Partners in New York, said in a telephone interview after Freeport’s earnings. “What they’re announcing is the results that happened, and I believe you buy stocks on what’s going to happen, and not what has happened.”

With the European Central Bank signaling it may increase stimulus and mounting optimism that the Federal Reserve will keep interest rates low, metal prices rallied Thursday, also giving producers a boost. Gold has gained more than 8 percent since reaching a five-year low in July, while copper futures are heading for a second straight monthly advance.

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