INVESTMENT FOCUS-Smaller miners more exposed to crisis

Fri Sep 25, 2015 1:05pm EDT
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* Small, mid-cap miners face deep output cuts

* Mining giants better equipped to tackle crisis

* Profit margins hover near record lows

By Atul Prakash

LONDON, Sept 25 (Reuters) - Investors in smaller mining companies are likely to suffer further losses as the recent plunge in commodities prices to multi-year lows pushes some firms to the brink of extinction.

Without the heft of a Glencore, which has suspended dividends, issued new shares and plans asset sales to cut debt after its share price plunged 60 percent in three months, smaller players may struggle to raise new funds.

That has prompted some analysts to advise investors to stay away from the sector, even though they say a rebalancing of demand and supply could underpin metals prices and improve the prospects of basic resources companies in the longer term.

"The market has to adjust so demand and supply come back into balance. Current developments in commodity prices suggest that it is going to happen faster than people had expected," said Tom Gidley-Kitchin, mining analyst at Charles Stanley.

"Smaller miners tend to get lower quality assets and lower margins and are more focused on exploration than mining. That's not something people are interested in funding at the moment."   Continued...