By Sarah Turner
SYDNEY (MarketWatch) -- Sydney-listed mining companies are
riding high along with commodity futures, although analysts will
likely be watching upcoming quarterly production reports for future
performance cues.
On Thursday, Rio Tinto Ltd. (RIO) shares gained 3.5%, BHP
Billiton Ltd. (BHP) shares climbed 1.9% and Newcrest Mining Ltd.
(NCMGF) shares rose 3.1%.
The advance helped the S&P/ASX 200 index climb 1.6%. Across
Asia, it was a similar story, with metal stocks on the move in
Japan, helping the Nikkei 225 index climb 1.8%.
Meanwhile, Hong Kong's Hang Seng Index , and Korea's Kospi Index
each rose 0.8%, while the Shanghai Composite Index rose 1.5%, and
the Singapore Strait Times index rose 0.4%.
The metals and mining sector has lately been buoyed by a
relentless rise in metal futures, with investors heading into
commodities on expectations that the U.S. Federal Reserve will ease
policy further, and that Chinese demand for commodities will
continue.
Gold futures ended New York trade at their 16th record high in
five weeks, and then broke that record in electronic trading in
Asia, moving near $1,378. Copper futures climbed 2 cents to $3.84
per pound.
Watching for production
Still, it's not all smooth sailing for the sector, as third
quarter production results are likely to illustrate.
For example, coal production is expected to have taken a hit in
the third quarter, with the wettest September in 100 years for
Queensland, and heavy rain in New South Wales too. That's led to
speculation that production has been offline at coal mining
operations in the region for longer than usual.
Against this background Rio Tinto may lower guidance for its
coal operations when it reports production figures later in the
session Thursday session, UBS analysts wrote.
They made the comments after Rio Tinto-managed and 75%-owned
Coal & Allied Industries Wednesday projected lower fiscal-year
production and sales after 13% of allotted production time was lost
to rain over the third quarter.
"We expect Rio Tinto to reduce their 2010 guidance for their
share of RTCA [Rio Tinto Coal and Allied]. We have cut our coal
production estimates and are forecasting 7% lower production than
guidance," the UBS analysts said.
Rio Tinto is giving its production update at the start of the
third-quarter reporting season for miners, and the UBS analysts
said that "all coal companies have the potential to disappoint,
relative to our forecast, due to the unseasonably wet weather."
Similarly, BHP Billiton, Macarthur Coal Ltd. (MCC.AU) and
Whitehaven Coal Ltd. (WHITF) could see some weather-related impact
in their coal operations, the UBS analysts said.
"Commentary on inventories will be important to assess the
vulnerability of supply going into the wet season between November
and March and the potential for higher metallurgical coal prices,"
they added.
Still, although coal production is likely to be a focus, BHP
Billiton is expected to see a record quarter for iron ore, while
Rio Tinto's iron-ore production "should be fine," with Western
Australian operations running at capacity, the UBS analysts
said.
BHP and Rio Tinto are currently trying to combine their Western
Australian iron-ore operations into a joint venture, although there
has been speculation of late about the future of the venture.
On Thursday, Fortescue Metals Group Ltd. provided some detail on
iron ore. It posted a 7% quarter-on-quarter drop in total ore
shipped to 10.3 million metric tonnes following maintenance
shutdowns.
The firm said that the figure exceeded its previous guidance of
9.5 million tonnes and shares retained gains after the results,
trading up 2.9%.