UK Miners: Higher Prices Against Higher Costs

The earnings season has produced mixed results for UK miners, with some companies experiencing significant growth due to higher prices, while others are grappling with increased costs and restructuring.

The Key Points Driving Miners

• UK miners with diverse portfolios, facing lower prices for industrial metals, have cut dividends.
• BHP to report next week, with analysts expecting lower dividends as the company deals with weak demand for raw materials used in Chinese housing construction.
• Miners focused on gold and copper have outperformed, with Antofagasta doubling earnings over the past year.
• Fresnillo's earnings tripled amid surging gold prices that JPMorgan says could push the company's share price to £21.00 per unit.

BHP to Match Lower Earnings Trend?

Among the major UK-based miners that have reported this earnings season, as they retain cash for large development projects and strive to control costs. Strong demand from China and supply chain issues in the aftermath of COVID have kept raw material prices higher, but the rise of trade wars and slower global growth are weighing on market prices. Although metals saw improvement through the early part of August, gains have been concentrated in copper and gold. This has provided disparate results, as lower iron ore and coal prices have impacted companies with diverse portfolios. That's the case for companies like Rio Tinto, Glencore and Anglo American. Meanwhile, companies like Fresnillo and Antofagasta, which focus on copper and gold, have outperformed.

BHP will report earnings on Monday and is expected to see a . Gains from higher copper production in Chile are expected to be offset by lower iron ore prices and increasing capital expenditure for its Jansen potash project. Analysts expect the company to set its annual dividend at $1.02, the lowest it has been in eight years. The company is vulnerable to China's property development sector, and traders are likely looking forward to comments on this. The central government in China is rumoured to be considering requiring in the latest bid to prop up the housing industry.

Fresnillo and Antofagasta Shine

driven by higher gold and silver prices and lower costs. Following its earnings, JPMorgan raised its price target for the company to £21.00 per share from £18.50, citing expectations that the price of gold could rise to $4,000 per ounce by the middle of next year.

Antofagasta, another company that defied expectations, from a year ago on Thursday. This allowed the company to raise its dividend by 110%. The gains were thanks to an increase in copper production, lower costs and rising sales prices. The company has also put aside its major capital development projects, with the second concentrator and the desalination plant in Los Pelambres on target.

BHP's Share Price Running into Concentrated Resistance

Through August to date, BHP's share price has been rising, but it took a breather ahead of earnings. Moving above the psychologically important 2,000p level, it faces resistance at the nearest swing high at 2,015, with the July maximum of 2,043 providing resistance above that. If the double top were to consolidate in the near term, the share price has the latest swing low at 1,890 for support. A break below that exposes the prior low in June at 1,690.

Source: SpreadEx | BHP Group