A Rockdrill Operater busy Underground the Lonmin' s Karee 3 shaft in Marikana in North West Province Picture: Boxer Ngwenya

Johannesburg - Mining shares fell sharply yesterday as fears deepened about the slowdown in the Chinese economy.

Resources stocks made up nine of the top ten biggest decliners among stocks included in the JSE all share index. Shares of mining companies slumped, dragging the mining index down by 4.63 percent.

Glencore fell as much as 15.36 percent on the JSE to a record low, before closing 9.8 percent lower at R22.55.

Anglo American, which ended 6.7 percent down at R136.45, was also hit by a Credit Suisse downgrade of its stock.

In London, Anglo American and Glencore, which are also listed there, were among the top losers on the FTSE 100 index.

“Glencore is a bet on copper and weakness in metal prices is sending tremors through Glencore’s shareholders,” Richard Knights, an analyst at Liberum Capital in London, said.

Analysts at Credit Suisse said in a note: “Until China demand and emerging market currencies find a floor, it will remain challenging to put an absolute floor on commodity prices.”

Among other JSE stocks, Harmony Gold was the biggest decliner among commodity stocks, falling as much as 14.46 percent before closing down 13.52 percent as R9.15.

Other big commodity stock decliners on the JSE included Kumba Iron Ore, Lonmin, Anglo American Platinum, African Rainbow Minerals, Northam Platinum, Anglo American and Royal Bafokeng Holdings, among others.

Big knocks

Cadiz Corporate Solutions mining analyst Peter Major said stocks were taking “big knocks”, adding that it was worrying the slide involved major mining companies, which were usually more stable.

The main factor dragging down platinum stocks was the fall in the spot platinum price, which hit its lowest level in six years, when it fell as low as $935.75 (R12 513.30) an ounce.

“All the industrial commodities are getting sold off,” Carole Ferguson, an analyst at brokerage SP Angel Corporate Finance in London, said.

The Richards Bay coal price fell to $61 a ton down from $84 in January.

Gold was quoted at $1 123 an ounce, relatively close to a low of $1 077 an ounce achieved in July. “Gold should hold up better than the rest, particularly if its safe-haven qualities start to re-emerge,” Ferguson said.

For South African mining companies, the fall in commodity prices might again raise the spectre of job cuts as companies will probably look at cutting costs and finding stability. Up to 19 000 jobs are at risk of being lost in the sector already.

The slide in shares makes life difficult for companies as lower share prices make it difficult to raise funding.

Normally rand weakness would be a boon for exporters, but local manufacturing is in recession and power cuts have forced the mines and other big industrial users to pare down production.

However, the inexplicable loss of share price was blamed on China’s slowdown, its stagnant commodity demand and the devaluation of its currency.

Ratings agency Moody’s said yesterday that the probable impact of China’s continuing economic slowdown on companies in Europe, the Middle East and Africa would be significant for sectors like metals and mining, but immaterial for many others.

Put on hold

“In response to the plunge in commodity prices, we expect that the operations of some mines with higher metal production costs will be put on hold until commodity prices improve,” Moody’s director Richard Morawetz said in a note yesterday.

“Metal and mining companies are most exposed to China’s gradual slowdown and could suffer both in terms of export volumes and the knock-on effect of lower prices.”

He said China had invested heavily in infrastructure and mines in Africa during the past decade as a future source of raw materials for its industries.

Moody’s estimates that between 20 percent and 30 percent of Europe, the Middle east and Africa mining output, in terms of revenue, is exported to China directly and indirectly.

An analyst at Noah Capital Markets said the loss of share price value on the local stocks was baffling, particularly as there had been no prior indication of the direction the markets would take today.

He said job cuts were not necessarily a given as a result of the slide in share prices, and that well managed companies would probably shrug off the declines and concentrate on stabilising their operations.

“Share prices are always volatile; the smart companies will not read too much into this,” he said.

* Additional reporting by Bloomberg and Reuters

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