Mining Stocks Make Major Gains

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UK mining share prices rallied today with a a long list of gainers on the F3MNG Index.  The entire sector was up by just under 3.0% at mid-afternoon, it’s biggest gain in a month.

Kenmare Resources (LSE:KMR) was up 5.46% to 29.85.  Hochschild Mining (LSE:HOC) was up 4.82% to 280.50.  Petropavlosk (LSE:POG) gained 4.91% to 206.00.  Lonmin (LSE:LMI) jumped 5.19% to 288.00.  Eurasian Natural Resources (LSE:ENRC) leapt 4.08% to 257.00, whilst Kazakhmys (LSE:KAZ) gained 4.11% to 388.00.  Xstrata (LSE:XTA) was up 3.58% to 1,070.50 and Rio Tinto (LSE:RIO) was up 3.74% to 3,102.20.  Glencore (LSE:GLEN) gained 3.75% to 355.45  while Vendanta (LSE:VED), which had been nip and tuck with Glencore on a percent increase basis, surged by 4.34% to 1,108.00.  Anglo American (LSE:AAL) followed with a 3.01% gain to 1,931.50 whilst BHP Billiton (LSE:BLT) was up by 2.85% to 1,931.50.  African Barrick Gold (LSE:ABG), Antofagasta (LSE:ANTO) and Randgold (LSE:RRS)  followed with gains of 2.74% to 202.60, 2.47% to 1,015.00, and 1.7% to 5,385.00 respectively.  With Fresnillo (LSE:FRES), Bumi (LSE:BUMI) and Petra Diamonds (LSE:PDL) also posting modest gains, the minor losses sustained by Centamin (LSE:CEY) and Polymetal (LSE:POLY) had little effect on the index for the day.

Mining stock have been declining in value since 15 February and are off by 12.65% for the year.  Today marks the second day in a row that the sector has moved in a positive direction, having closed at 17,010.29 on 5 April and 17,147.74 yesterday, April 8th.  It’s going to take a steady stream of good news from the mining companies and commodity pricing in general for the index to pass the 20,000 mark, which it has done three times in the past 12 months.

Even mining companies not included in the F3MNG Index put in amazing gains, including Orosur (LSE:OMI) up 9.70% to 36.75. Medusa (LSE:MML) up 6.29% to 304.00, and Kenmare (LSE:KMR) up 5.74% to 29.82.

There is a popular sentiment that Alcoa’s (NYSE:AA) better-than-expected first-quarter profits have boosted confidence in the mining sector.  On the other hand, there are reports that Alcoa’s continuing increase in share price is due to a rumored takeover of the company by Rio Tinto.  IMHO, this is the kind of crazy rumor-mongering, circular-reasoning that can easily lead investors astray.

There seems to be a consensus that commodity prices are taking an upward turn with a general increase in confidence and demand.  How China’s economy performs should have a direct effect on the sector as well.  China’s inflation rate was at 2.1% for March, down from 3.2% in February.

John Meyer of SP Angel, in an interview with Bloomberg TV’s Francine Lacqua today,  made a sage comment that investors might want to heed.  He said, “Right now you’re going to get better performance out of the stocks rather than the commodities themselves.”  Regardless of the Alcoa rumor, which is probably false, Meyer’s comment is most likely realistic.

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