ASX200 metals and mining shares were smashed in morning trade on Wednesday as softer precious metal prices and concerns over slowing Chinese growth saw sharp drops of over 5% for some of Australia’s biggest miners.
Mining explorer Iluka Resources Limited (ASX: ILU), lithium miner Orocobre Limited (ASX: ORE) and alumina producer Alumina Limited (ASX: AWC) all saw sharp declines in early trade this morning as price volatility and a bleaker growth outlook for the sector weighed on the ASX200.
The damage didn’t stop there, as major players BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) saw their share prices fall 0.94% and 0.70%, respectively, as the metals and mining sector felt the impact of an increasingly softer macroeconomic environment. Despite global risk-off sentiment and a shift towards higher gold asset allocation, gold miners Regis Resources Limited (ASX: RRL) and St Barbara Ltd (ASX: SBM) couldn’t escape the damage, with their shares down 3.14% and 3.56%, respectively at the time of writing.
Today’s sharp decline comes amid ongoing global trade tensions, the looming threat of Brexit disruption and a slowdown in Chinese economic growth which have negatively impacted demand for precious metals. The Australian economy’s reliance on China remains a key concern for investors given the support that ongoing economic expansion and construction provides for regional commodity prices. These macro factors have all combined for a perfect storm that has put an end to the sustained period of robust commodities prices that have supported some of Australia’s largest miners in recent months.
Whilst most of the metals and mining companies have been hammered on the ASX today, there are potential nuggets of gold for keen-eyed investors. I like graphite producer Syrah Resources (ASX: SYR) which has continued its bullish start to the year in today’s trade, up 4.56% today to $2.065 per share. The stock is up nearly 35% since the beginning of 2019 on the back of strong commercial production data coming out of its Mozambique-based Balama operations and provides a solid option for investors looking to increase their allocation towards the mining sector.
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Returns as of 6th October 2020
Motley Fool contributor Lachlan Hall 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.
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