Just how strong are the world's biggest miners?
Across the latest three calendar years, ten of the world's biggest miners produced an aggregate USD 195bn in operating cash flows, used USD 115bn of that for capital expenditure, and ended 2009 with USD 83bn in net debt, including cash. These kinds of surveys can now be made, given that the majority of earnings reports for 2009 have been publicised.
Measured on capital expenditure, and the ability to finance it from internal cash flows, BHP Billiton, the world's biggest diversified resources stock, easily outflanks the rest, having produced USD 51bn in operating cash flows over the past three years, just over a quarter of the total. The mega group also boasts an exceptionally strong balance sheet, relative to practically all parameters, including its market value, and cash generating capabilities.
Eoin Treacy's view The
largest mining companies have come through the credit crisis in comparatively
healthy shape and even those that made ill-timed acquisitions or have an overhang
of debt have returned impressive results. While at the 2008 nadir there were
many who were writing off the commodity sector as a burst bubble, subsequent
performance has challenged that assumption in no uncertain terms.
BHP
Billiton has sustained a consistent progression of rising major reaction
lows from late 2008. It tested its previous high last month and has been consolidating
its advance since. While a somewhat longer pause in the region of the previous
high would not be surprising, a sustained move below 1800p would ask serious
questions about the consistency of the medium-term uptrend. Such a decline would
break the sequence of higher lows, form a larger reaction, from a higher level
and break through the 200-day moving average.
Rio
Tinto also pulled back from a recent high only to find support in the region
of the 200-day moving average. A sustained move below 2850p would be required
to question the consistency of the medium-term uptrend. CVRD
(Vale) has a similar pattern with the operative level in the region of BRL45.
Freeport-McMoran
Copper & Gold has had a larger pull back and a smaller subsequent rally
compared to the above shares. It needs to find support above the recent reaction
low near $65.80 if the medium-term bullish outlook is to remain credible. Anglo
American shares a similar pattern.
Xstrata
has retraced less of the bear market decline than the shares mentioned above
but also bounced from the 200-day MA three weeks ago and a sustained move below
that level would be required to question scope for further higher to lateral
ranging.
Barrick
Gold continues to range between C$35 and C$50. While it found support above
C$35 three weeks ago it needs to sustain a move above C$44 to break the short-term
progression of lower highs and reassert demand dominance.
Anglo
Platinum broke upwards from its base in August and continues to range higher.
It pulled back from the psychological ZAR80,000 in January and is now testing
the 200-day moving average which coincides with the progression of higher lows.
A sustained move below ZAR65,000 would likely signal a lengthier consolidation.
Potash
Corp of Saskatchewan has been ranging mostly above C$100 since January 2009
and needs to sustain a move above C$130 to complete the base and signal a return
to demand dominance.
Teck
Resources has just experienced the biggest pullback in a year from the region
of C$40. It found support above the 200-day moving average and rallied back
to test the high. A sustained move to new recovery highs would be needed reassert
the medium-term uptrend and offset scope for some further consolidation of its
impressive advance.
There
is a high degree of commonality between these shares. All have rallied impressively
over the last year and recently pulled back to the test their means, defined
by the 200-day moving average. They need to consolidate above their reaction
lows if the medium-term bullish outlook is to be sustained.