Its old news that mining companies are suffering from a collapse in metals and minerals prices, but their shares have to stop tumbling eventually, dont they? The answer is an obvious yes, but will it be this week, as two of our most heavily-traded miners have plunged to new 52-week lows yet again?
BHP Billiton (LSE: BLT) produces iron ore, copper, potash, coal, petroleum and that diversity should help protect it compared to single-resource miners, shouldnt it? Not a bit of it, as the share price has fallen 40% over the past 12 months to a new low of 877p at Thursdays close.
The latest slide has been worsened by a disaster at the Samarco iron ore operation in Brazil, in which BHP holds a 50% stake. A dam there has failed, releasing significant mine tailings and damaging a second dam in the three-tier dam complex. But more significantly, the community of Bento Rodrigues has been flooded and other communities have been affected and there are fatalities, though the number is not yet known.
Without meaning to sound cynical, could this latest news perhaps signal a time of maximum pessimism, which is so often the best time to buy shares in a company? That depends on where BHP Billiton is in the commodities cycle and the current cycle is one of epic proportions. BHPs shares were fetching around 25 just a few short years ago in 2011, with the Western financial crisis followed by a slowdown in Chinese growth, which is looking worse than we feared, extending the subsequent bear phase beyond living memory.
In ten years time Im sure BHP shares will have rewarded anyone who buys today, but over the next year I have no idea the price seems as likely to fall another 50% as rise 50%.
The 52-week low of 450p at Anglo American (LSE: AAL) represents a 64% fall in just 12 months, and the shares were as high as 34 in 2011 the stock has seen an 87% fall from its peak compared to BHPs mere 65% drop.
Anglo has had its share of disasters in the past, and the latest is looking like a financial one. While the company is focusing on selling non-core assets in an attempt to make a dent in its huge debt mountain, many in the City are thinking that it might not be sufficient and that Anglo American could be the next major miner, after Glencore, to turn to its shareholders with cap in hand and that the forecast dividend is excessive and will have to be slashed.
Thursdays announcement of senior management changes serves to reinforce those fears, as we hear that the chief of Anglos Brazilian iron ore business is stepping down to pursue other opportunities, and that Peter Whitcutt has been appointed as the new boss of the companys marketing business.
Chief Executive Mark Cutifani has made it clear that he wants a renewed focus on Anglos sales and marketing the idea of a Get your lovely platinum here, its better than anyone elses drive might seem strange, but the move is more focused on the firms commodities brokerage in a similar way to Glencores.
Of the worlds top five miners, Anglo Americans share price fall has been the worst, and something needs to be done to stop the rot. Whether the latest moves are just window dressing or a realistic directional adjustment remains to be seen.
Buying top-quality shares when they’re cheap, and hanging onto them for the long term, is one of the best ways to secure your financial future.
To find out more, get yourself a copy of the Motley Fool’s special 7 Simple Steps For Seeking Serious Wealth report, which shows you how investing in shares and reinvesting dividends has wiped the floor with every other form of investment over the past century and more.
It’s completely FREE, so click here for your personal copy and get started today.
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.