Blackrock World Mining (LON:BRWM) has just released its interim results. Their views always make for interesting reading:
Déjà vu
This year the gyrations of macro events around the globe appear to have been
the most significant drivers of share price moves. Market attention has been
focused on the uncertainties surrounding US, European and Chinese economic
growth. Monetary tightening in China has continued unabated. In the US, the
Government has moved from declaring an end to quantitative easing earlier in
the year to most recently reopening the door to a similar policy but under a
different name. In Europe, the continued debt default saga has raged but with
attention shifting from Ireland to Greece to Portugal to Spain and, more
recently, Italy. With the benefit of hindsight it is easy to see why equity
valuations have been challenged given the high level of uncertainty around the
world.
In addition, 2011 has seen a repeat of the resource nationalism trend impacting
the mining sector. Throughout the world the resources sector is increasingly
being seen as a soft target from which governments can raise tax revenues.
Proposals to increase taxes have been common place with Brazil, Tanzania,
Western Australia, Mauritania and even the UK (North Sea Oil) seeking to do so.
In Peru, the election of President Humala, whose manifesto included
increases in taxes for the mining industry, led to material falls in the value
of mining companies with assets in the country. The Company has always had a
high exposure to Peru given its large endowment of natural resources,
especially copper. At the height of speculation around the election result,
this led to severe volatility in share prices and the Company was not able to
shelter from this.
Other countries have raised the prospect of more extreme measures such as
nationalisation in South Africa and indigenisation in Zimbabwe. The new Prime
Minister of Australia, apparently not having learnt anything from last year's
Minerals Resource Rent Tax debacle, has proposed a deeply unpopular Carbon Tax.
All of these moves around the world should only serve to increase the chance
that investments into new mines are delayed and this in turn is likely to push
out supply growth. For markets where the supply and demand balance is already
precarious, such as copper, this could lead to spikes in prices…
