Newspaper article The Evening Standard (London, England)

Caz Says Dig into Miners in the Wake of Sell-Off

Newspaper article The Evening Standard (London, England)

Caz Says Dig into Miners in the Wake of Sell-Off

Article excerpt


A SHARP drop in the price of raw materials has meant mining companies suffered their biggest monthly fall in 11 years during September, and the third-biggest monthly fall on record.

Broker Cazenove believes the selling has been overdone, and today set about making its case to convince clients to plough more money back into the sector.

It points out that earnings momentum for most of the miners has actually improved, with the decline in metal prices being more than offset by producer currencies, including sterling.

As the copper price starts to find a floor, the market's focus will return to the sector's attractive cashflow profile, particularly among the bulk commodity miners which are beginning to reap the rewards of the huge price increases seen at the end of the first half.

This should help curtail their recent underperformance and reverse it as the sector moves into 2009, says Cazenove.

Among the diversified miners, it has an outperform rating and 1430p target on BHP Billiton, up 17p at 1402p. It also has outperform ratings on Anglo-American (2245p), up 84p at 2279p and Vedanta Resources, up 8p at 1521p (1522p).

An outperform rating is also awarded to Ferrexpo, 0.9p better at 165.9p, (167p target), among the single commodity mines. Ferrexpo yesterday lost its place as a constituent of the Footsie 100 index because of the poor performance of its shares of late.

Elsewhere, Kazakhmys put on 38p at 863p, and Xstrata 73p to 2298p Rio Tinto has taken a 14.9% stake in Kalahari Minerals, 2p better at 36?p, with the purchase of 24.8 million shares. Rio Tinto has also bought 23.1 million shares in the Australian-based

Extract Resources, amounting to almost 11% of the company, and plans to buy all the remaining shares in issue.

Despite the rally by the miners, the FTSE 100 fell 62.4 to 5303.8, its lowest level since July, while the broader FTSE 250 slumped 129.4 to 8837.8.

Banks came under the hammer after the Bank of England said it would be announcing details of a permanent successor to its special liquidity scheme. The new scheme would not provide them with long-term funding. …

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