Mining shares have soared this morning after South Africa announced a 21-day nationwide lockdown.
Anglo American (AAL) and Rio Tinto (RIO) put out statements noting comments from South African president Cyril Ramaphosa, who said ‘immediate, swift and extraordinary action’ is required in the wake of the coronavirus pandemic.
Both companies have mines in the country, and are set to slow down operations with the lockdown coming into effect on Thursday.
BOOST FOR COMMODITY PRICES
Anglo shares jumped 7.4% to £11.72 while Rio’s share price increased 6.5% to £33.03, reflecting the likely prospect of higher commodity prices as supply becomes strained.
Other diversified FTSE 100 miners also jumped, with BHP (BHP) rising 11.4% to £12.32 and Glencore (GLEN) moving 5.8% higher to 119p.
Single commodity companies like copper miner Antofagasta (ANTO) also increased, with the Chilean miner’s shares rising 6.7% to 660p. Mexican gold and silver miner Fresnillo (FRES) rose 7% to 663p.
PLATINUM AND PALLADIUM PRICES COULD JUMP
Shore Capital analyst Yuen Low noted that while other countries have also announced similar restrictions, South Africa is ‘particularly notable’ as it accounts for 75% and 38% of global platinum and palladium supply.
Palladium in particular has been a sought after commodity, though its price has fallen dramatically in recent weeks.
Having touched an all-time high of $2,850 per ounce a few months ago, the price now sits at around $1,500 per ounce. A decrease in supply should in theory help push prices up again.
South Africa is also a significant producer of vanadium, chrome, manganese and titanium, the prices of which are also expected to increase as the lockdown begins and supply tightens.
MINERS REVIEW OPERATIONS
In a statement, Rio Tinto said it will curtail production at its mineral sands operation, Richards Bay Minerals, with arrangements for the furnaces to be put on care and maintenance in order to avoid damage to their continuous operations.
No time-frame has been given for when operations will resume.
Anglo American said it will review the regulations being published by the South African authorities in relation to the lockdown, and put out a further statement in due course.
