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Miners bear brunt of risk aversion as investors take fright

Reuters  |  LONDON/KATOWICE, Poland 

By and Barbara Lewis

LONDON/KATOWICE, (Reuters) - A two-year recovery in the industry has faltered, as trade tensions between China and the United States and concerns about economic growth weaken commodity prices and deter investment.

Institutional investors and fund managers say tighter regulations, namely MiFID, a major reform of financial markets, have limited banks' lending to companies and reduced research coverage, giving them to carry out due diligence on businesses.

Sustainability and anxiety about the impact of on global warming has also risen to the top of the agenda, pushing miners to find new resources in riskier and politically unstable jurisdictions. "An increasing number of investors are becoming aware that ESG (environment, social, governance) risks can also be financially relevant," Matthew Smith, at Storebrand Asset Management, said.

The total amount raised in debt, equity and depository receipts for the mining sector globally in the first nine months of the year fell 60 percent to $18.8 billion, compared to $44.9 billion in the same period a year ago, Global Market Intelligence data shows.

At the same time, the number of new London listings has fallen again after a tentative recovery in 2017, with the amount of money raised by junior miners so far this year down more than 40 percent from 2018, figures from the show.

With an 11 percent fall this year so far, mining has been the third worst performing sector in London after and the automobile industry.

Junior miners are worst affected, but major mining companies also say they are undervalued and are striving to improve their image through partnerships and promises to tackle sustainability.

Fund activity is also shrinking, according to financial data provider Preqin, which said 17 metals and mining funds are seeking to raise $4.6 billion in capital, compared to $7.9 billion in January.

Mining companies say it has been a bad year, but the best projects can still find financing and they see potential in battery minerals.

A global battery boom, driven by growing demand for electric cars and renewable power, is expected to stoke demand for metals such as nickel, and manganese and encouraging miners to accelerate development plans.

Another seen as a good bet is copper because of its role in electrification as grids are transformed to cope with

"There's money around for the right story," of Bacanora, a company, said.

Prices of lithium, also used for rechargeable batteries, have been very volatile, but analysts say consumption will grow as there is no obvious substitute.

At climate talks in Poland, taking place to agree how the terms of a global transition from fossil fuel, on Tuesday, and Britain made a joint declaration to promote electric vehicles.

cancelled a share sale in July because of volatile market conditions, but Secker said it has hired to explore future options for the new year.

(Reporting by and Clara Denina; additional reporting by Zandi Shabalala; editing by Elaine Hardcastle)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, December 05 2018. 17:57 IST
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