For shareholders in mining and resources giants Rio Tinto Limited (ASX: RIO) and Woodside Petroleum Limited (ASX: WPL), 2014 has been tough. Since January 2nd they're down 15% and 2%, respectively.
However top quality gold miners like Newcrest Mining Limited (ASX: NCM) have outperformed the market handsomely.
Here's what you can expect from them in 2015…
Rio Tinto Limited
As Australia's lowest cost iron ore miner, Rio Tinto has a healthy margin between the current spot price of approximately $US67 per tonne and its estimated breakeven price of $US43 per tonne. However with prices down from $US135 per tonne this time last year, the commodities more than 50% falls will be felt in the company's top line (revenue) in 2015 and beyond. The steelmaking ingredient accounted for 90% of Rio's latest annual profit result. And whilst its does have operations in aluminium, bauxite, coal, copper and uranium; its share price could come under further selling pressure in 2015 as prices fall.
Woodside
The share price of our largest independent oil and gas company has drifted through 2014 relatively unscathed, despite the price for Brent Crude oil collapsing from over $US100 per barrel to just $US57 per barrel. Whilst Woodside is profitable under the current spot price, there's speculation global oil prices could go lower in 2015, or at least stay around their current prices, as a result of more US shale production coming online over the next few years.
Newcrest
After a calamitous crash in 2013, the price of gold (in Australian dollars) has jumped higher recently, to over $1,450 per ounce as a result of the depreciating AUD. Newcrest, Australia's largest gold miner, had an all-in sustaining cost (AISC) of less than $1,000 per ounce in the September quarter. However, as always, there are many forces at play in the global geopolitical environment which make forecasting gold prices near impossible. For example, if Russia – whose economy is currently being severely harmed by Western sanctions and a lower oil price – decides to sell some of its 1,169 tonnes of gold, spot prices could come under further downwards pressure. Yet if uncertainty increases in global markets, as the US Fed raises interest rates for example, that could be a reason to be bullish on gold.
Your best bet for 2015
The resources sector can be a tough for even the most astute investors but with unprecedented Chinese industrialisation and the commodity super cycle now behind us, it could be time to look elsewhere for great returns.
