Mining Companies

[AlfaFoxtrot]

I want to invest in some mining companies, both for diversity, and as a long term growth prospect (can't see demand for minerals decreasing with BRIC growth!).

I'm looking for a relatively safe investment, so BHP, Rio Tinto et al seem fairly straightforward choices. However, looking around, they have all recovered quite well from early 2009 lows but Xstrata is still sat at ~1000 after being several times that pre-credit crunch. How come? I've not been following business news for long, so I don't know much of their history, but again I can't see the demand for coal doing anything but increase in the future so I'm tempted to favour this.

If anyone has any other thoughts/advice, feel free to comment.

[Pommygranite]

AlfaFoxtrot said:

I want to invest in some mining companies, both for diversity, and as a long term growth prospect (can't see demand for minerals decreasing with BRIC growth!).

I'm looking for a relatively safe investment, so BHP, Rio Tinto et al seem fairly straightforward choices. However, looking around, they have all recovered quite well from early 2009 lows but Xstrata is still sat at ~1000 after being several times that pre-credit crunch. How come? I've not been following business news for long, so I don't know much of their history, but again I can't see the demand for coal doing anything but increase in the future so I'm tempted to favour this.

If anyone has any other thoughts/advice, feel free to comment.

Rio here in oz is sat at around $70 per share. The advisers seem to think $100 is the appropriate long term pricing. Just a thought and not advice from me by the way...

[nomisesor]

XTA, like the other big companies, is about a lot more than coal. I was keen on both RIO & XTA when the crunch hit, on the basis that they, unlike the financial companies, held real assets & was fortunate to time my buys & be able to take up rights in XTA & RIO when both were fairly low. I've been away for a couple of weeks so haven't kept track of the Australian tax debate and other relevant news but suspect that XTA is going to wobble along at about the current price for a while. The Baltic dry index is worth keeping an eye on if you're interested in megaton miners.

Rather than one stock, how about an exchange traded fund, which mirrors an index, in this case you could mirror any one of a whole range of specialist or generalist mining indicies, reducing your dependence on the performance of one company in a low cost, liquid manner? Google "mining ETF".

Edited by nomisesor on Tuesday 17th August 09:18

Edited by nomisesor on Tuesday 17th August 13:09

[DonkeyApple]

AlfaFoxtrot said:

I want to invest in some mining companies, both for diversity, and as a long term growth prospect (can't see demand for minerals decreasing with BRIC growth!).

I'm looking for a relatively safe investment, so BHP, Rio Tinto et al seem fairly straightforward choices. However, looking around, they have all recovered quite well from early 2009 lows but Xstrata is still sat at ~1000 after being several times that pre-credit crunch. How come? I've not been following business news for long, so I don't know much of their history, but again I can't see the demand for coal doing anything but increase in the future so I'm tempted to favour this.

If anyone has any other thoughts/advice, feel free to comment.

Trouble is that if that view is the consensus then it is already priced in.

Besides demand may keep rising but the price will fall if open market supply increases, ie plenty of hoarders out there and if some of them start selling down.

Picking individual shares is a minefield unless you research each one meticulously.

As such, I would hazard that investing fixed amounts into a mining ETF on a monthly or quarterly basis may proove a wiser course of action and less speculative.

[nomisesor]

DonkeyApple said:

[

Picking individual shares is a minefield.

A little prospecting in the overburdened financial pages and you'll be able to dig out a lode rich in fine unalloyed puns - 6 in this sentence.

Back on topic - remember that both XTA and RIO have had large rights issues since they were worth multiples of current prices. I subscribed to both but can't remember the ratios. If it was 2 for 1 then pre-rights there were only 1/3 of the current shares in circulation, so each would be worth far more then than one is now. If I've got this wrong (it's late & I was at work for 13hrs) let me know but - a company with 100 shares valued at £1 each has a rights issue of 2 for 1, priced at 25p each, full take-up, company gets 0.25 x 200 = £50, so total capital value of company is now £150, divided over 300 shares = share price of £0.50, all else being equal. The share price has apparently halved, but each share is worth the same.