There’s been some volatility in these three resources shares during the week, but they are all springing back up today.
South32 Ltd (ASX: S32)
Shares in South32 traded as low as $3.34 this morning, 4% down from Tuesday’s closing price of $3.48. Yesterday the mining giant announced that the Constitutional Court of Colombia ordered the company to undertake compensatory and remedial activities in relation to alleged health and environmental impacts of its Cerro Matoso nickel mine.
While at the moment it’s difficult to estimate the financial impact of the court ruling, the decision poses immediate operational challenges, and requires South32 to apply for a new mining licence. However, the main risk in all the controversy seems to be maintaining the company’s reputation.
South32 adopted a reactive approach to the matter, promptly stating the decision lacked scientific support and applied to nullify the judgement. The reaction reassured investors, pushing the share price up again to $3.48 at the time of writing.
Mineral Resources Limited (ASX: MIN)
The Mineral Resources share price hit a minimum of $16.22 in today’s trade, 6% down from last Wednesday’s closing price. The company entered into a trading halt last Thursday on speculation that it was going to acquire iron ore miner Atlas Iron Limited (ASX: AGO), and resumed trading on Monday, following the official announcement of the takeover.
The news wasn’t particularly well received by the market. The 59% premium on Atlas’ share price felt excessive, considering the negative outlook for low-grade iron ore prices.
Today Mineral Resources reaffirmed its EBITDA guidance of greater than $500 million for FY2018. The company announced a 7% increase in the price of its lithium spodumene to US$960 per tonne, which offset a contraction in lithium exports due to adverse weather and logistic events. As a result, shares in Mineral Resources grew as high as $16.72 today, weakening to $16.46 at the time of writing.
Mount Gibson Iron Limited (ASX: MGX)
Small cap Mount Gibson is up 3% to 40 cents a share today, gaining back the losses sustained over the past two days.
Today the company released its quarterly activities update, posting iron ore sales of 1 million wet metric tonnes, 16% up from the March 2017 quarter. Despite the tough conditions in the iron ore market, Mount Gibson maintains a healthy buffer of $470 million in cash and liquid investments. In the quarter the company generated an operating cash flow of $17 million, which partially offset the $24 million spent on restarting the Koolan Island project.
Production at Koolan Island is expected to commence in the March 2019 quarter, providing high-grade iron ore to boost Mount Gibson’s revenues.
It's been a nail-biter of a reporting season here in the first half of 2018.
But the real action, in my opinion, is what companies are doing with dividends.
What does this mean for you? Well there is one stock I've found that could very well turn out to be THE best buy of 2018. And while there's no such thing as a 'sure thing' when it comes to investing - this ripper might come as close as I've ever seen.
Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.