Mining — what went up has come dow…

The mining industry has a widowmaker reputation that has certainly been earned. Just as things start to look exciting, they often crash down to Earth. The right time to buy mining stocks is usually when nobody else wants them. The right time to get rid of them is when people start adding them to long-term portfolios.

The Anglo American Platinum share price has shed 36% of its value in 2022. It is now trading at similar levels to mid-2020 when the pandemic was raging.

A trading statement for the six months to June 2022 reminds us why this has happened. The platinum group metals (PGM) basket price fell by 14% vs the record prices achieved in the prior period.

Sales volumes are down 20% because the prior period enjoyed unusually high work-in-progress stock at the start of the period. The combined impact is ugly, with headline earnings per share (HEPS) down between 40% and 50%.

We then move on to Kumba Iron Ore, another Anglo company. The share price is flat in 2022, though it has lost 36% of its value in the past 12 months. Kumba produces premium iron ore and enjoys a price well above the benchmark price (15% higher in the six months ended June).

Still, an overall drop in free on board (FOB) export iron ore prices in the wake of global financial pressure and recessionary fears has led to a drop of between 48% and 53% in HEPS for the six-month period.

Anglo American offers a smoother earnings profile than the underlying portfolio companies because it is exposed to a wider…