Mining tiddlers shoot the lights out in stellar year for iron ore
Two of Australia’s hottest exploration stocks were the standout performers among local miners in 2020.
Two of Australia’s hottest exploration stocks were the standout performers among local miners in 2020, shooting past the stellar year for iron ore miners to remind the market that the drill bit can still deliver plenty of blue sky for savvy investors in junior stocks.
The rivers of cash flowing from the Pilbara’s iron ore heartland delivered Fortescue Metals a bigger market capitalisation than Westpac by the end of the year, gave Rio Tinto a single bright spot in a year it wrecked its own corporate reputation, and helped incoming BHP boss Mike Henry to a stellar start to his regime.
China’s insatiable demand for iron ore put a spring in the step of institutional and retail investors alike — not to mention federal treasurer Josh Frydenberg and his WA counterpart, Ben Wyatt — but the best returns came from the juniors, including the surprise resurgence of beaten down lithium stocks late in the year.
While 2020 was one to forget for many Australians, De Grey Mining and Chalice Mining surged from exploration hopefuls to two of the hottest stocks on the market, finishing the year worth about $1.25bn apiece as exploration success was rewarded by a market starved for local success stories in recent years.
Chalice ended 2019 at 22.5c and closed on Thursday at $3.90, for a total return of 1633 per cent, after its spectacular discovery of palladium and base metals in March at its Julimar project, only 70km from Perth, propelled it into the billion-dollar club.
Its stellar rise was topped only by that of De Grey, a penny stock worth only 4.6c in late January, which closed 2020 at $1.015, for a total gain of 1890 per cent.
De Grey has been operating in the Pilbara since 2003, slowly building a gold inventory of 1.7 million ounces at scattered deposits about 60km south of Port Hedland, and its announcement last December of a new gold discovery at its Hemi prospect barely rated a stir on the market.
But over the last year De Grey has turned Hemi into one of the closest watched new gold discoveries in a decade, with the company surging past the $1bn mark in late 2020 and expectations growing for its first resource statement at Hemi due by the middle of 2021.
But while the returns from riskier stocks was spectacular, there is no doubt that 2020 belonged to the iron ore miners.
Two years ago iron ore was trading at about $US75 a tonne, still a good little earner for the majors but far tougher for smaller miners such as Chris Ellison’s Mineral Resources.
But dam wall failure in Brazil in early 2019 restricted supply and China’s decision to try to turbocharge its coronavirus recovery by infrastructure and construction sectors lifted the price again in 2020 to peak just shy of $US180 a tonne, delivering Mineral Resources a 127 per cent in its share price and a total return to investors of 136.3 per cent, when dividend payouts are factored in.
That return was topped only by that of Fortescue, with a total return of 151 per cent, and a market gain of 119.2 per cent.
By most standards Rio had a horror year, trashing its corporate reputation with the destruction of heritage sites at Juukan Gorge and shedding its chief executive and iron ore boss along the way.
Its troubles at the Oyu Tolgoi mine in Mongolia, lack of growth options and the need to rebuild its reputation will pose plenty of headaches for incoming boss Jakob Stausholm.
But the iron ore price will help ensure he has plenty of cash to throw at shareholders to smooth the way, and despite the horror year Rio delivered a total return of 20.3 per cent.
BHP, also rolling in iron ore cash, had a total return for the year of 14.5 per cent.
Perhaps the surprise packet of the final quarter was the resurgence of lithium stocks, with Pilbara Minerals and Galaxy Resources delivering the third and fourth best annual share price returns from the S&P ASX Metals and Mining 300 index, with gains of 233.5 per cent and 143.5 per cent respectively.
After falling below 13c in March, as the coronavirus crisis spread across the globe, Pilbara Minerals is not so far from its $1.165 peak three years ago, despite the fact the lithium market is a long way from fully recovering from the combined impact of the pandemic and the glut of raw materials on the market.
With the gold price hitting new records in 2020, the market reserved its biggest punishment for those companies that couldn’t deliver on production promises at a time of high prices.
Dacian Gold was the worst performer among Australia’s mid-tier miners, down 57.5 per cent for the year at 41c, with West African gold play Resolute Mining down 36.9 per cent at 80c and Red 5 off 21.2 per cent to 26c.
More Coverage
