‘Not sustainable at all’: Investors stockpiling miners in spite of soaring share prices – by Peter Koven (Financial Post – July 2, 2016)


It feels like a lifetime ago, but only five months have passed since investors thought Canada’s two biggest copper miners were at risk of collapsing.

In mid-January, Teck Resources Ltd.’s long-term notes traded as low as 38.5 cents on the dollar. Meanwhile, the debt of First Quantum Minerals Ltd., one of its chief rivals, traded between 40 and 45 cents. The mining industry was drowning in debt and the market feared that big-name companies were heading for painful restructurings, if not outright failure.

It’s easy to see where that kind of thinking came from. Commodity prices were plummeting, and most experts thought they were going nowhere for at least the next few years, possibly the next decade. Stock prices across the mining sector were at multi-year lows, and investor sentiment on the sector was arguably the worst it had ever been.

It is a different world today. Nearly every significant mining stock has doubled, tripled or quadrupled from its mid-January low. The debt concerns, which were front and centre over the winter, are long forgotten. Money has been raised across the sector — even some of the micro-caps on the long-neglected TSX Venture Exchange managed to get their hands on cash.

The sector’s stock performance has been simply incredible. Every one of the top 10 performers on the S&P/TSX Composite Index so far in 2016 is a mining company, as are 17 of the top 20. It is a complete reversal from 2015, when the worst performers were all mining and energy firms.

The initial bump in January and February was not surprising since the stocks were absurdly cheap and a relief rally was inevitable. But many onlookers have been stunned at how they have continued to rise over the past several weeks.

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