Miners suffer adverse investor sentiment due to political turmoil

Mining stocks around the world slipped into negative territory as China further tightened its monetary policy for the second time this year and due to the political unrest in the Middle East and North Africa. We look at investor sentiment towards; Rio Tinto (LON:RIO), BHP Billiton (LON:BLT), Anglo American (LON:AAL), Vedanta Resources (LON:VED), Antofagasta (LON:ANTO) and Seabridge Gold (TSE:SEA).

In a report published by Data Explorers at the end of last month,Investor Sentiment towards M&A, we noted mounting pressure for share buybacks from major mining companies. Since then, BHP Billiton and Rio Tinto have announced share buybacks worth a combined USD 10.8 billion. Short interest in the UK listings of these stocks remains low at less than 1% of total shares outstanding on loan with institutional ownership on the increase. However, the Australian listing of Rio Tinto sees short interest holding at a high of 5% of total shares outstanding on loan, which represents 20% of the lendable supply.

Our screen of investor sentiment in 160 global mining stocks highlighted that investors are broadly bearish towards miners, although we also noted increased demand for precious metals as investors hedge their losses due to the political turmoil.

FTSE 100 mining stock, Vedanta Resources, is flagged as a stock subject to negative investor sentiment. Short interest currently stands at a 10 month high of 8% of total shares outstanding on loan. Coupled with a decrease in holding of funds who lend (which can also be used as a proxy for institutional ownership), we note over half the lendable supply is currently out on loan. The company is also reported as facing pressure from bondholders to cancel its plans to buy Cairn Energy’s Indian exploration unit.

Anglo American shares have been falling recently despite reporting strong earnings and agreeing on a joint venture with Lafarge. Short interest has doubled to 4% of total shares outstanding on loan since late December, while the share price has recently reached new annual highs. It must be noted that there is a convertible bond in issue, which may inflate the percentage of shares outstanding on loan.

Although, investors are broadly bearish towards miners, short interest in gold miners is comparatively low as the price of the precious metal soars. The exception is Seabridge Gold which has recently reported finding more gold than expected at its KSM project in British Columbia. Short interest has doubled to 10% of shares outstanding on loan since September, which accounts for more than 85% of the lendable supply out on loan.

Amongst the list of stocks seeing positive investor sentiment, Antofagasta, the Chilean-based copper miner has been subject to short covering, with the percentage of shares outstanding on loan having decreased from 2% to 0.6% since December. During this time, institutional ownership has increased by over 20%. BHP Billiton also appears on the positive investor sentiment list as the company has been subject to low short interest and rising institutional ownership over the past month.

Users of the Bloomberg terminal can download the attached document which shows how to conduct analysis on one of the stocks list above

Please contact media@dataexplorers.com if you would like to see the screen of mining stocks subject to positive and negative investor sentiment.