Mining firms presented an optimistic future of rising commodity prices, suggesting a boon for investors in precious and industrial metals.
Leaner operating models at mining firms, established during a recent down market, should aid a continued rebound in their stock prices, added speakers at the annual Mining Indaba conference in Cape Town.
“To paraphrase a quote attributed to Mark Twain, the reports of mining's death are greatly exaggerated,” said Mark Cutifani, chief executive of mining firm Anglo American.
He said a rebound in iron ore and coal prices in the second half of 2016 had provided a reprieve from a challenging few years in which falling Chinese demand caused commodity prices to plummet.
“Despite volatility, last year turned out better than expected,” added Bold Baatar, chief executive for energy and minerals at Rio Tinto. “Prices were broadly higher than were predicted and share prices recovered.”
South Africa's minister of mineral resources, Mosebenzi Joseph Zwane, echoed the optimistic tone, remarking that, “There are signs we are entering a new spring. A new balance is emerging in demand and supply of mineral resources.”
Despite the optimism, some fund managers remain sceptical about mining stocks. One manager noted that gold mining stocks made the same nominal profits last year as they did 20 years ago, implying a steep fall in real terms. “We view [gold mining stocks] as value destructors,” he said.
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