A BIG problem when it comes to day trading most retail equities is that sifting through balance sheets, analysing company performance and then taking a position based on your analysis isn’t the easiest thing in the world. But when trading mining equities, you often have the advantage of trading the macroeconomic news affecting the stock, rather than the underlying stock itself. Witness the sensitivity of the Australian miners to any news coming out of the Central Bank of China. Or the effects of strong domestic production figures strengthening the dollar and in turn giving a boost to the producers of dollar-denominated gold, such as Fresnillo and BHP Billiton.
But why not simply take a position on China directly, rather than taking a position on Rio Tinto? Or Mexico, rather than Fresnillo? One answer is that many of the world’s largest commodity producers are in relatively closed economies. It is much easier and cheaper to buy a contract for difference (CFD) on a FTSE-listed miner with a heavy reliance upon Chinese demand than it is to try and play with Remnimbi-denominated Chinese corporate debt.
By spread betting or taking a CFD on a mining stock, you can also mitigate the currency risk usually inherent in buying non-domestic stocks – since you are buying a derivative and not the underlying stocks, you do not run the risk of having profits wiped out by a strengthening dollar.
And the FTSE is awash with miners (making up 13 per cent of the index and dispelling any illusions that the FTSE is a UK-facing index).
AFRICAN BARRICK GOLD
Based in Tanzania, African Barrick is one of Africa’s top five gold producers. The miner has produced an estimated 4.3m attributable ounces of gold since 1999. IG Index quotes 328.6p-329.3 for African Barrick Gold.
Anglo American is one of the world’s top producers of copper, nickel, iron ore and coal worldwide. Anglo American has a huge grip on the platinum market – producing 40 per cent of the world’s supply. CMC Markets quotes 1,938p-1,942p for Anglo American.
Antofagasta’s activities are mainly concentrated in Chile, where it owns and operates three copper mines. It produced almost 640,000 tons of copper last year. Capital Spreads quotes 983p-985p for Antofagasta.
BHP Billiton is Australia’s largest company and the largest mining firm in the world – producing gold, petroleum, aluminium, copper, nickel, silver, uranium, iron, coal and manganese. IG Index quotes 1,673.5p-1,674.5p for BHP Billiton.
EURASIAN NATURAL RESOURCES
London-headquartered ENRC operates in Kazakhstan, China, Russia, Brazil and Africa (the Democratic Republic of Congo, Zambia, Mozambique and South Africa), with a diversified production portfolio of iron, aluminium and fuels. Its yearly revenues are in excess of $6.8bn. CMC Markets quotes 413p-413.7p for ENRC.
Mexican-based firm Fresnillo is the world’s largest producer of silver and Mexico’s second largest gold miner. Capital Spreads quotes 1,284p-1,284.7p for Fresnillo.
London-headquartered Johnson Matthey can trace its origins back to 1817. It is a chemical conglomerate that also refines and distributes platinum, palladium, rhodium, iridium, ruthenium, gold and silver. IG Index quotes 1,211p-1,211.3p for Johnson Matthey.
Kazakhmys is is a top-ten copper mining firm with principal operations in Kazakhstan and business headquarters in London. Kazakhmys also produces zinc, silver and gold. CMC Markets quotes 652.17-653.87p for Kazakhmys.
Lonmin is the world’s third largest primary producer of platinum, with operations based in South Africa and listings on the London Stock Exchange and the Johannesburg Stock Exchange. In 2011, Lonmin’s year-on-year platinum metal in concentrate and refined platinum production increased by 3.5 per cent and 24.3 per cent respectively to 2.7m tonnes. Capital Spreads quotes 689.1p-691.9p for Lonmin.
Randgold Resources is an African gold producer with operations in Mali, Senegal and the Democratic Republic of the Congo. The company has primary listings on the London Stock Exchange and Nasdaq. IG Index quotes 5,170p-5,180p for Randgold Resources.
Rio Tinto is a leading British-Australian mining and exploration firm producing aluminium, copper, diamonds, energy products, gold, industrial minerals and iron ore. CMC Markets quotes 2,739.13p-2,744p for Rio Tinto.
Vedanta Resources is India’s largest non-ferrous metals and mining company. producing copper, zinc, aluminium, lead and iron ore. Vedanta also has a presence in Zambia and Australia. Capital Spreads quotes 896.6p-899.1p for Vedanta Resources.
Formerly known as Sudelektra, Xstrata is a global mining company producing coal, copper, nickel, primary vanadium and zinc. Xtrata is also the world’s largest producer of ferrochrome. IG Index quotes 900p-905p for Xtrata.