Mining Stocks Fall Sharply on Concerns Over China Economy

The Asian Development Bank cut its growth forecasts for China and said its waning appetite for raw materials would hurt commodity-focused export economies such as Mongolia and Indonesia.

On Tuesday, there were widespread worries that data to be released late Wednesday will show a continued decline in Chinese factory activity. Anglo American touched a 15-year low and Antofagasta sank 7.3 per cent. KAZ Minerals, a small copper miner in Kazakhstan, lost 25 per cent.

Copper declined 3.8 per cent to $US5068.50 ($7160) a tonne.

Credit Suisse Group cut its price estimates for large diversified miners including Glencore and BHP Billiton.

Even in the gold mining sector, traditionally considered an outlier from global macroeconomic forces, companies were shellacked on Tuesday.

‘The heavyweight mining sector is well bloodied as the USA dollar continues to rally from its post-Fed-hold lows to hurt commodities.

The mood is particularly bleak at the Denver Gold Forum, an annual mining conference this week.

“There’s broad based weakness across most miners today”, said Gavin Wood, chief investment officer at Kagiso Asset Management in Cape Town. The world’s biggest mining company reported a 52 percent drop in underlying full-year earnings last month, highlighting its challenges as Chief Executive Officer Andrew Mackenzie seeks to trim capital spending.

They were weighed down by a subdued copper price, which slid on worries over Chinese demand.

The company also has heavy debt – something that it needs to finance its massive commodities trading arm but that has become a liability as its cash flow sinks and questions get raised about its credit rating. “Glencore, in particular, doesn’t have the quality of assets that some of the others do”.

He slashed his target price for Glencore to 175p, adding that it “suffered a complete loss of confidence from investors” after the recent £1.6bn share placing at 125p.

UNITED UTILITIES – The multi utility said current trading is in line with expectations but said its financial results in the first half of the financial year will be hit by compensation payments related to a water incident in August and restructuring costs.

Glencore’s shares are down almost two thirds since the beginning of the year and are down more than 80% since the company’s London share listing in 2011.

Such was the selling pressure on Glencore that its shares were suspended twice during the day, at 8.56am and at 1.22pm, when a single order would have put the share price down by 3% or more, according to the London Stock Exchange.