Friday feeding frenzy for mining stocks

Blue Horseshoe loves Anacott Steel. Stock image.

Shares in the world’s largest mining companies rallied on Friday after a big jump in copper and gold prices in New York following a positive US jobs report that suggested the Fed’s aggressive rate hikes may slow sooner than expected and renewed hopes that China’s disastrous zero-covid policy may be eased.

Copper enjoyed one of its best trading days in years, surging 7.9% in New York to exchange hands for $3.697 per pound ($8,150 a tonne) in midday trade, a 10-week high for the December Comex contract.

On the London Metal Exchange, aluminium prices increased 2.3% to $2,317 a tonne, zinc jumped 4.6% to $2,845, lead was the laggard with a 0.6% gain to $2,007 while nickel climbed 3.1% to $23,500 and tin was up 2.1% at $18,130.

Gold prices also gained with the precious metal up nearly $50 to $1,678 per ounce while silver was trading 6.7% higher to scale the $20 an ounce level for the first time in three weeks.

US jobs and Chinese covid policies

China consumes half the world’s base metals and the rally on Friday was sparked by swirling rumours that the country may move away from its zero-covid policy. Reuters reports a former Chinese disease control official on Friday said the country “will soon make substantial changes” to the way it handles the disease.

The copper price was also underpinned by further evidence of supply problems for the world’s bellwether metal with top producer Chile announcing a nearly 5% fall in output and Peruvian giant Las Bambas saying community protests and blockades are forcing it to curb production.

Precious metals got a lift from the increase in US nonfarm payrolls which “doesn’t add much pressure on the US Federal Reserve to raise rates faster than the market already expected,” Capital Economics commodities economist Edward Gardner said in a message quoted by Bloomberg. 

“The data release reduces the risk of faster-than-expected rate hikes going forward, which would raise the opportunity cost of holding gold.”

Mining majors rally

Shares in BHP jumped 8.5% in New York, lifting the value of the world’s top diversified miner’s value to $131 billion. 

The world’s no. 2 and 3 miners, Rio Tinto and Vale also made sharp gains, trading up 8.4% and 9.5% respectively. Melbourne-based Rio Tinto is worth $93 billion while Rio de Janeiro HQ’d Vale has a $65 billion market cap. 

Glencore’s advance on Friday was more modest, adding 3.7%, but the Swiss based miner and commodities trader is the only mining heavyweight trading in the black in 2022, with year-to-date gains of nearly 20%. 

Among copper specialists, Phoenix-based  Freeport McMoRan traded up 10% to within sight of a $50 billion valuation, Southern Copper added 9.7% for a $40 billion market cap while Canada’s First Quantum Minerals was the top gainer on the day with a 17% jump.    

Gold producers also shot up with world number one Newmont up 7.2% and second in terms of annual ounces produced. Barrick was trading 6.4% higher, although Friday’s gains were not enough to erase the counters’ losses earlier in the week.

Streamer Wheaton Precious Metals enjoyed double digit percentage gains while fellow royalty companies Franco-Nevada gained 7.1% and Royal Gold 6.5%.