Mining share prices are controlled by... ?

jonboy123 · Aug 13, 2009

hi, i noticed big moves today in mining stocks.

I think fueled by GDP reports from europe.

But Metal prices are linked to Mining companies stock prices?
Metals are commodities, right?

Which metals should be looked at, if someone was analysing the mining sector?
Does oil come into it?

Thanks.

Technically Fundamental · Aug 13, 2009

I think there's a lot of stuff going on with china inventories atm and the whole fraud thing.

wh92stang · Aug 14, 2009

Miners make a majority of their profits from the price of the metals and/or minerals they sell. The price of metals and minerals is dependent on worldwide demand. So it is all linked together, good GDP reports signal the economies of the certain countries are improving. This would lead to an increase in building and industrial production, therefore the demand for raw materials will increase and miners will profit.

Which metals should be looked at depends on the individual company. If you go to the website of any of the publicly traded miners you are looking at: Rio Tinto, Vale, BHP Billiton, Freeport McMoran, etc. you can find a breakdown of what materials they get their revenues from and what countries they primarily sell products to.

As for you oil question, it depends more if the company is in the oil business. BHP Billiton has an oil operation that amounts to about 20% of their total revenues, while Rio Tinto and Vale do not have significant oil operations.

It's all about research, you've got to find what the major raw materials each company mines for and compare.

Technically Fundamental · Aug 14, 2009

There's a bit of hubub about China possibly blagging a recovery and buying steel as a false indication of growth is purportedly one of the methods of deception. Suppose they're hoping their new mining activities will hedge the loss if the sh*t hits the fan :-S

jonboy123 · Aug 14, 2009

wh92stang said:
Miners make a majority of their profits from the price of the metals and/or minerals they sell. The price of metals and minerals is dependent on worldwide demand. So it is all linked together, good GDP reports signal the economies of the certain countries are improving. This would lead to an increase in building and industrial production, therefore the demand for raw materials will increase and miners will profit.

Which metals should be looked at depends on the individual company. If you go to the website of any of the publicly traded miners you are looking at: Rio Tinto, Vale, BHP Billiton, Freeport McMoran, etc. you can find a breakdown of what materials they get their revenues from and what countries they primarily sell products to.

As for you oil question, it depends more if the company is in the oil business. BHP Billiton has an oil operation that amounts to about 20% of their total revenues, while Rio Tinto and Vale do not have significant oil operations.

It's all about research, you've got to find what the major raw materials each company mines for and compare.

thankyou.

your first paragraph. Would this all happen in a short time eg. instantly? or would it take weeks and months for the effect to show on mining stocks?
if Metal price goes up 9am, mining stocks reflect this instantly? or would it take along time eg when the company actually sells the metal for the increased price in effect only then pushing up sales revenue of company...
i guess traders are making the affect instant on the share price, right?

i will research more, cheers for the heads up.

Broadly speaking, it seems Miners are affected by and large by 2 variables:
1) economic news (which suggests shift in supply and demand)
2) Metal(s) price

wh92stang · Aug 14, 2009

I think you're right on when you say that traders make the effect of price changes instant on the share prices. The company only reports earnings every 3 or 6 months, but the shareholders anticipate earnings fluctuations with changes in the prices of the materials the company mines. The two variables you have pointed out are a good summary, sounds like you understand.

Technically Fundamental · Aug 14, 2009

jonboy123 said:
Would this all happen in a short time eg. instantly? or would it take weeks and months for the effect to show on mining stocks?

Check the price action/volatility/volume after an announcement and IMO it wouldn't hurt to know how many shares are out there for the company (see annual report) too. Charting is based on the premise that everything is factored into the price that you see and as there is a difference between market value and intrinsic value of the stock I also believe that trading that makes the price move.
Learning the type of traders that are in your market and how they operate (which I have no idea how to do as of yet) will be an important factor of your understanding the market. Imagine an institution thought rio tinto was a good long term investment and put orders in to buy in blocks at 23 with a view to sell in the future at 28. What would happen in that instance?

jonboy123 said:
Broadly speaking, it seems Miners are affected by and large by 2 variables:
1) economic news (which suggests shift in supply and demand)
2) Metal(s) price

Supply and demand could affect metals price too. Imagine they spent money on new mining venture and they find they overestimated the amount of iron in the area.

I'm just thinking aloud here so I'm waffling a bit.

jonboy123 · Aug 14, 2009

ok thanks wh92

techfund: about how many shares are out there for a company. What does this indicate?

"Learning the type of traders that are in your market and how they operate". That makes sense. Man i have no idea how institutions trade. But yeah i can imagine them hiding and being discreet if they want to, or misleading the market/other traders somewhere else.

yes sup&dem for metal too. If demand for a metal goes down as some companies dont need that metal much anymore, price of metal goes down, mining stock also goes down by bearish traders and falling sales over time....generally speaking.

cheers.

Technically Fundamental · Aug 15, 2009

volume:total shares

Mining share prices are controlled by... ?

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