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Mining is shining

Created:
14 November 2007
Written by:
Alastair Ford

"We will remain opportunistic", says Jay Hambro, chief executive of Aricom, the Russian-focussed developer of iron ore and titanium projects. He's referring to the likelihood of corporate activity in the immediate or medium term. Two things prompt the remark. The first is the general and continued buoyancy of the mining sector. The second is the mooted takeover of Rio Tinto by BHP Billiton, both of which have considerable capacity in iron ore.

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If that deal were to go through it would be extremely positive for the smaller miners, according to Mr Hambro. That's because regulators will inevitably influence the future structure of a Rio-BHP combination: "The competition commission will get them to free up assets, making them available for smaller players like us to pick up." A Rio-BHP tie-in would also, he says, be good for the industry as it would free up infrastructure capacity for other people. At the moment, there are log-jams all over the sector because the volume of work has shot up so much over recent years that the available capacity has struggled to keep up.

This dynamic is underpinned by continued strong metal prices. Although Mr Hambro isn't as bullish as some about next year's likely increase in iron ore prices, there will, nonetheless, definitely be an increase. And the outlook for the industry bellweather - gold - remains very favourable too. Analysts at RBC Capital Markets reckon that the gold price will continue to be strong next year, after some seasonal weakness over the Christmas period. At Black Rock, fund manager Evy Hambro agrees. While over at Fairfax, John Meyer, who's heading up the new resources team there, says platinum supply is struggling to meet demand.

It's in this environment that Tianshan Goldfields is raising A$15.5m to continue development work at its Gold Mountain project in China, Anglesey Mining is raising £23m for its Labrador Iron Mines subsidiary, Palmary has increased its offer for Consolidated Minerals to A$4.70 per share (204p), Jubilee Platinum is raising £11m for its South African Tjate project, and Mineral Securities has just upped its stake in Platmin.

IC VIEW:

Aricom (67.5p), Platmin (492p), Tianshan (25p), and Mineral Securities (70p) all rate a buy, while Anglesey Mining (27.5p) is fairly priced, and Jubilee (94.75p) is good value.

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