Mining shares have been lifted by the day's strong trade data from China , a key consumer of commodities. Glencore Xstrata has added 7.05p to 316.70p while Rio Tinto has risen 36.5p to 3151.5p, BHP Billiton is 11p better at £17.83 and Anglo American has added 18.5p to £12.45. But Mexican precious metals miner Fresnillo has fallen 12p to 662.5p, the biggest faller in the leading index, after negative comments from Barclays . The bank's analysts downgraded the company from overweight to equal weight, saying: Fresnillo was a very poor performer throughout 2013 and we worry that 2014 may offer little respite given minimal production growth. While the company has at its core a very high quality set of assets, financial performance has been, and in our view will continue to be, impeded by operational issues at the Penmont joint venture mines (which are yet to be resolved), the imposition of new royalties and dividend withholding taxes in Mexico , stubbornly rising costs, and lower metals prices. The latter, we feel, is likely to impact the company's development plans, with certain expansions that were due to be approved in the second half of 2013 having not occurred, which has a follow-on impact on the growth profile. In a note on the UK quoted miners, Barclays was positive on Glencore and Billiton, but cautious on the sector as a whole: We fear 2014 could, initially, be another difficult period for the Mining sector. The key issues of negative earnings growth, minimal free cash flow generation, slowing Chinese demand and surging supply remain in place. Broader macro is also unlikely to be supportive of commodity pricing (developed market recovery, emerging market malaise, higher rates/stronger US dollar, geopolitical uncertainty). As we look into 2015 however, free cash flow yields in particular start to pick up (5%) and earnings growth turns positive, on our forecasts. So at some stage in 2014 the market may start to price in recovery, but the first quarter of 2014 at least looks like 'more of the same'. So we retain our negative sector view for the time being. We have reconfigured our ratings around those stocks that can deliver earnings growth in a flat price environment, albeit with risk recognition of commodity specifics (our two upgrades have a copper focus). We move Glencore to overweight [from equal weight], which alongside sector bellwether BHP Billiton sit as our top diversified picks. We remain more cautious on iron ore heavyweights Rio Tinto (equal weight) and Vale (underweight). In copper we upgrade First Quantum to overweight [from equal weight] and retain our long- running underweight on Kazakhmys .
Most Popular Stories
- Obama Administration Releases Proposal to Regulate For-Profit Colleges
- Elizabeth Vargas' Husband Marc Cohn Addresses Rumors
- Keurig Adds Peet's coffee, Alters Starbucks deal
- Quiznos Files for Chapter 11
- U.S. to Relinquish Gov't Control Over Internet
- Is Malaysian Airlines Flight 370 in Andaman Sea?
- Koch Brothers Step up Anti-Obamacare Campaign
- SoCalGas Reaches Record Spend on Diversity Suppliers
- Vybz Kartel Convicted of Murder
- U.S. Consumer Sentiment Falls in Early March