Mining stocks fall as copper, iron ore price reach new lows

The value of base and precious metal miners and the diversified giants all fell on Friday as commodity prices dropped to fresh multi-year lows, forecasts for the year were slashed and weakness returned to precious metals markets.

In afternoon trade in New York on Tuesday copper for delivery in March dropped more than 3% to a low of $2.49 per pound, the lowest since July 2009 and down 13% so far this year.

Gains in the price of iron ore late last year also evaporated with the steelmaking raw material now down more than 8% since the start of January after a 47% slide in 2014. Chinese import prices for 62% iron content fines at the port of Tianjin sunk to $65.90 a tonne on Friday after six straight down days.

After a great run, precious metals also pulled back on Friday with gold trading back below $1,300 an ounce and silver also gave up some of its recent gains to trade at $18.30. Gold is still trading more than 8.3% higher this year while silver is the start performer surging 14.7% in 2015 and nearly wiping out last year's losses.

But the biggest loser on the day was – once again – oil. After data from the EIA showed US crude inventories are now the highest in 80 years (yes, eighty) at 387.9 million barrels, benchmark prices lost more than 2%, dipping below $45 a barrel for the first time since March 2009.

The Swiss company relies on copper for 38% of its earnings (vs 20% at BHP Billiton and only 10% at Rio Tinto) so it has a lot riding on the outlook for the red metal.

Goldman Sachs released its estimates for iron ore and copper on Friday which only added to the negative sentiment. The investment bank cut its outlook for iron ore for this year to $66 a tonne this year, down substantially from an earlier estimate of $80 reports Bloomberg:

"Significant overinvestment to date will ensure that the market is well supplied, while demand from the Chinese steel sector is maturing. A painful war of attrition awaits."

Goldman is not even the most bearish among the commodity trading banks – Citigroup believes iron ore will average $58 in 2015, another down 12% drop from the today's ruling price.

When it comes to copper price however, Goldman delivered some painful predictions saying that the red metal could dip as low as $2.36 a pound ($5,200 per tonne) near term.

The analysts argue "ongoing deflationary pressure" as a result of cost-cutting by miners, weaker producer currencies and lower energy costs will result in lower and flatter cost curve and a deeper "U" shape for the copper price. A big jump in copper warehouse stocks – up 27% in January alone – only contributed to the negative sentiment.

The bleak outlook for the sector prompted investors to look for exits, resulting in billions of lost market value among heavyweights.

The Big Three iron ore producers were particularly hard hit. World number one BHP Billiton (NYSE:BHP) fell 3.8% in New York. The Melbourne-based company which relies on oil and iron ore for more than three-quarters of earnings is down 38% over the last six months with a market capitalization of $121.3 billion. BHP peaked at a market cap of $280 billion in 2011.

Top iron ore miner Vale (NYSE:VALE) was one of the worst performers on the day, tanking just under 8% after the company suffered a downgrade of its debt by ratings agency Standard & Poor, the first time in eight years.

The globe's second largest miner based on revenue Rio Tinto (NYSE:RIO) which relies on copper and iron for 83% of its earnings dropped 4%. North American iron ore producer Cliffs Natural Resources plummeted 12.8% on the day, but has halved in value over the past six months. The company is a shadow of its former self, worth $1.1 billion on the NYSE compared to nearly $15 billion less than four years ago.

Anglo American (LON:AAL) shares fell nearly 5% in New York despite being the recipient of an upgraded rating from Goldman Sachs on Friday and enjoying a buy rating from a number of brokers. Anglo’s chief executive, Mark Cutifani, began a major review of operations from Australia to Brazil after joining the firm in April 2013.

Today the company announced it may sell coal mines in Australia following plans to exit its South African platinum operations and sell three copper mines and a smelter in Chile. Thanks to its majority shareholding in diamond giant De Beers, Anglo American has a 25% exposure to arguably the best performing commodity over the past year and one with the brightest outlook.

Canada's Teck Resources (TSX:TCK) was the best performer among the diversified heavyweights adding 10.5% after an analyst upgrade and news of its first shipment of zinc and lead (together with nickel the best performing metals this year) from its restarted Pend Oreille mining operations in northeastern Washington State.

Glencore (LON:GLEN), the world's fourth largest miner after absorbing X-strata in 2013 dived 5.8% London affording the company a market value of $52 billion. The Swiss-based giant fell to a record low since going public in May 2011 last week on the back of the fall in the price of copper. Of the diversified heavyweights Glencore is the most exposed to copper which accounts for 38% of its earnings, almost as much as its commodities marketing and trading business.

Canada's Teck Resources lost 3.1% thanks to its exposure to coal and oil, while copper and gold giant Freeport-McMoRan (NYSE:FCX) slid 3.9% after announcing an ambitious capital spending program in Indonesia, location of its massive Grasberg mine. The company said it plans to invest about $17 billion to build a copper smelter and expand its mines in the country to comply with a government law phasing out exports of unrefined ore and concentrates.

$23 billion Southern Copper Corp (NYSE:SCCO) managed a 3.2% while fellow South American copper producer Antofagasta's (LON:ANTO) losses were heavier, falling 6% into the red after two downgrades of its shares.

Despite a gold price up more than 8% this year, the break in the upward momentum for the precious metal convinced punters to take some profits.

Global number one Barrick Gold Corp lost 2.8%, while losses at fellow Canadian counter Goldcorp (TSX:G), at $19.9 billion the world's most valuable gold miner, were a modest 1%.

Vancouver-based gold and silver streaming firm Silver Wheaton (TSE:SLW) lost 2%. Yamana Gold (TSE:YRI) and Agnico Eagle Mines (TSE:AEM), responsible for the biggest gold sector acquisition in some time when it bought Osisko's Malartic mine in Quebec last year for over $4 billion, gained 3.4% and 3.1% respectively.

Further down the market cap list the gains were also pronounced with Canadian mid-tier companies IAMGold (TSE:IMG) hammered down 9.3% in Toronto after announcing the completion of the sale of its Niobec niobium mine for $500 million in cash.

Bleeding at Eldorado Goldcorp (TSE:GLD) continued on Friday with the counter losing another 9.7%. The $5 billion Vancouver-based company lost a quarter of its value over the last two trading days after slashing its production forecast for the year amid a huge jump in costs at its European, Turkisk and Chinese mines.