Final Third

There is an R in the month, so it's time to invest in mining.

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As I write, September 13, we are half way through the St Leger Festival, two weeks into the oyster season and, even more importantly for miners, safely into the final third of the year.

In the Northern Hemisphere, the nights are drawing in, and next Sunday, September 23, sees the Autumn equinox, with its equal duration of light and dark. On the brighter side, there is an R in the month, so we can eat oysters in the UK. This advice dates to at least 1599, when it appeared in Henry Buttes's cookbook, "Dyets Dry Dinner," although some historians trace it to an ancient Latin saying.

This folklore is based on common sense, since the four months without an R — May through August — coincide with summer in the Northern Hemisphere. The warm months are bad, or even toxic, for oysters as shellfish were more likely to spoil in the heat. Oysters also spawn in the summer months so, with most of their energy spent on reproduction, oysters' meat is liable to be thin and milky.

Another popular adage in the UK is, "Sell in May and go away, and don't come back till St Leger's Day." This advice is intended for investors rather than gourmands, although it coincides with oysters being out of season.

The St Leger Stakes is a horse race run on the middle Saturday in September, which falls on the 15th this year, and is the culmination of a four-day festival in Doncaster. The race, established in 1776, is the oldest — and longest, at almost 3,000 m — of Britain's five classic races, and is the last one run each year.

The "Sell in May" advice was prophetic for metals investors this year. Staying away from commodity markets during the middle third of 2018 would have avoided a decline of almost 8% in the price of nickel, 9% in gold, 12% in copper and a fall of nearly 26% in the price of zinc. The prices of aluminium, iron ore and coal did improve, however, in the period from end-April to end-August after a weak first third of the year.

Following the historic adage would not have been profitable in 2017, when the middle part of the year was the strongest four-month period for five of the seven commodities listed above. In 2016, however, the middle third was the weakest period of the year for four of the seven commodities, with copper and iron ore suffering particularly poor performances.

Industry's Valuation

The market capitalization of the world's listed exploration and mining companies has also suffered over the past four months. S&P Global Market Intelligence reports that the circa 2,500 listed mining companies had a combined market capitalization of over US$1.5 trillion at the end of April but this had fallen below US$1.4 trillion by end-August. Indeed, the largest 25 mining companies saw their market capitalization fall 8.5%, month-on-month, to US$777 billion by the end of August.

The adage is not targeted at mining investors specifically, of course, and was sound advice for general investors in the UK this year. The FTSE 100 index peaked in May, and by the start of the St Leger Festival this week the share-price index was down 6%.

The Financial Times last week commented that, thanks to its reliance on miners, the FTSE 100 is a good proxy for global growth expectations (the sector makes up 8% of the index by market capitalisation). The abrupt fall in share prices for the likes of Glencore, Anglo American and Rio Tinto, highlights the concern over Chinese demand and the escalating global trade tension.

Investors should still be wary but at least St Leger is running, and oysters are back.


Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.