Ground Breakers: Falling metal prices deliver hangover for Aussie miners
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A smattering of gold stocks have salvaged some value from the wreckage this morning as falling metal prices and a big overnight drop in the US NASDAQ coalesced to send Aussie miners to the wolves.
A lot of this is, again, down to China, where the end of restrictions in Shanghai has been tempered by fears the Covid outbreak in Beijing could get worse.
Futures prices have taken a tumble, with Dalian iron ore down 1.1% this morning after a US$5.85 drop in 62% iron ore fines to US$122.20/t, the lowest level in a couple months.
They had climbed as high as ~US$163/t in the wake of Russia’s invasion of Ukraine, before China’s lockdowns skittled demand.
Oil prices and thermal coal came off slightly overnight as well along with a slew of base metals.
That was mirrored across the iron ore market, effectively tanking the materials index, down 1.66% with energy slipping 1.86%.
The handful of winners were largely in the gold space, as prices rose slightly to US$1817/oz, helped by a weaker Aussie dollar.
Evolution Mining (ASX:EVN) shares were up 1.31%, with Mark Clark’s Capricorn Metals (ASX:CMM) 1.27% higher, his former mob Regis Resources (ASX:RRL) up 1.2%, Northern Star (ASX:NST) 1.17% better, Perseus Mining (ASX:PRU) 1.01% higher and Gold Road (ASX:GOR) up 0.78%.
Goldman Sachs analysts have slapped a big buy recommendation on BlueScope Steel (ASX:BSL), with Paul Young and Hugo Nicolaci saying the stock could be worth 40% more than its current price.
They have put a $24.9/share 12 month price target on BlueScope shares, down from a $25.3/share target issued on Monday before a profit upgrade yesterday.
BlueScope shares were going for $17.77 this morning.
Young and Nicolaci say BlueScope is “one of the highest margin value add steel businesses in the world due to their global leading metal coating and painted steel market position.”
They pointed to BSL’s 40-50% production mix of high EBITDA margin painted and coated steel, a value added product, as a key benefit over fellow US steel producers along with the strong price outlook for steel in the States.
“The increase in the US HRC price to above US$1,350/st and benefit to North Star spreads, is now offsetting elevated coking coal and iron ore which is impacting Aus/ASP spreads.”
Goldman’s FY23 EBITDA and earnings per share forecasts would increase 45% and 60% respectively at spot prices.