Q3 winning streak over: 'Considerable underperformance' among Canadian miners in Q4
Canadian mining stocks experienced a 45% decrease in market capitalization in 2013, with the last quarter alone showing a 9% drop, according to Earnst & Young's Canadian Mining Eye Q4 2013 report.
It's well known that concerns over global economic growth and uncertainty over what the US Federal Reserve would do next dragged down commodity prices, leading companies to write down assets and cut costs.
And, despite some mild improvements in the third quarter, last quarter of 2013 unfolded much like the rest of the year: Poorly.
The Canadian Mining Eye index – which tracks the performance of 100 TSX and TSXV mid-tier and junior companies with market capitalizations between $1.4b and $55m in Q3 – shed 9%. The preceding quarter the index rose by 5%.
"This indicated a considerable underperformance relative to the S&P/TSX Composite index that gained 7% in the fourth quarter," according to the report.
By commodity group, the only winners were among the diamond, platinum group metals, and coal and consumable fuels sectors.
The gold and fertilizer minerals sectors were hit the hargest; gold dropped 27% over the year and the potash industry was crushed by the breakup of the Russian-Belarusian potash cartel in July.
As for individual companies, Colossus Minerals is the index's biggest loser; the company experienced a net share price decline of 91% during the quarter.
One-third of the comapnies tracked by the Canadian Mining Eye index realized a net gain in the fourth quarter, compared with more than half in the third quarter.
Lucara diamonds came out on top, gaining 66% on its share price. Brigus gold gained 42% throughout the quarter after its flagship Black Fox mine acheieved record gold production.
But miners can take solace in the fact that 2013 is over and, at least according to Earnst & Young, 2014 will provide growth opportunities for companies across the sector.
"We note that a new year has brought some transactional activity for companies with good quality projects and lower valuations," researchers wrote.
"Investors are likely to view the current underperformance as a buying opportunity as projects are de-risked. We expect companies to continue to adopt a disciplined approach to capital management and to seek creative financing options to withstand the downturn."