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Market caps decline in metals, mining due to US dollar strength, ESG issues


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Market caps decline in metals, mining due to US dollar strength, ESG issues

BHP Group and Rio Tinto continued to dominate the list of top metals and mining companies by market capitalization in September, as the sector collectively lost value against a strengthening U.S. dollar and reports of numerous environmental, social and governance issues.

The 25 largest companies in the space held a total market cap of US$817.07 billion as of Sept. 30. Rio Tinto and BHP Group had an aggregate market value of $220.39 billion, more than a quarter of the combined total of the 25 companies. Market cap percentage changes were calculated based on reported currencies, while the analysis bases company rankings on market values converted into U.S. dollars.

After substantial quarterly gains, metals prices went into "correction mode" in September, an Oct. 2 analysis by S&P Global Market Intelligence noted. Gold markets, which have benefited from investors flocking to the safe-haven investment due to increased market volatility, saw some of that interest turn back to the strengthening U.S. dollar in September.

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Companies in the metals and mining sector booked a median market value decline of 4.0% from the end of August through September. However, the sector's median market cap for September was about 63.5% higher year over year.

Only three of the 25 largest miners increased their market value through the weeks of September: Saudi Arabian Mining Co. (Ma'aden), Anglo American PLC and Freeport-McMoRan Inc.

The greatest declines in market value over the period were booked by Zijin Mining Group Co. Ltd., Shandong Gold Mining Co. Ltd., Anglo American Platinum Ltd. and PJSC Polyus.

The ranking of the top miners by market cap held somewhat steady in September, and the ranking of the top eight miners was unchanged. The top eight companies comprise BHP Group, Rio Tinto, Vale SA, Newmont Corp., Barrick Gold Corp., PJSC Norilsk Nickel Co., Fortescue Metals Group Ltd. and Southern Copper Corp.

The three largest companies by market cap are in the same rank order as September 2019, while Newmont has risen from the sixth-largest metals and mining company to the fourth largest.

In an Oct. 6 note, Moody's Investors Service highlighted that the COVID-19 pandemic has led to suspended development projects and increased costs to protect employees and communities in recent months, and said the trend will likely continue.

"Although companies will see better fixed cost absorption as production returns to pre-pandemic levels, a certain amount of incremental cost will remain as long as there are increased protocols on social distancing, cleaning and other safety measures," Moody's Senior Vice President Barbara Mattos wrote regarding mining and metals companies.

Maintaining a social license to operate continues to be one of the biggest challenges for the sector, Mattos wrote. She added that, while miners will likely continue to face increased social and operational pressures, companies that embrace and implement new technologies may differentiate themselves.

Recently, corporate ESG issues have dominated the headlines about the world's top miners.

BHP Group CEO and Executive Director Mike Henry acknowledged during a recent climate briefing that the company has a role in addressing climate risk. He said the mining giant plans to continue shifting away from its thermal coal assets and "create and secure more options in future-facing commodities." The company also recently agreed to a $505 million deal to increase its oil and gas interests in the Shenzi field in the deepwater U.S. Gulf of Mexico.

"A better world requires a fair transition that seizes decarbonization while ensuring that people maintain access to the resources that they need for their daily lives and to support improvement in their economic well-being," Henry said during the Sept. 10 briefing.

Several Rio Tinto executives left the company in mid-September due to controversy created when the company's iron ore mining operations resulted in the destruction of historic Aboriginal heritage sites in Australia. Communities in Papua New Guinea also filed a complaint in September, accusing Rio Tinto of introducing dangerous pollution at a former copper-gold mining operation in the country.

Vale recently received a ratings upgrade from Moody's based on improvements to its ESG practices in the wake of a highly fatal tailings dam disaster at its Brazilian Corrego do Feijao iron ore mine in early 2019. The company is also reportedly in talks to supply Tesla Inc. and others in the electric vehicle supply chain with low-carbon nickel for batteries.