Where to from here for out big miners?

As anyone who is keeping an eye on their investment portfolios will know, share prices for Australia’s top miners, Rio Tinto, BHP and Fortesque Metal group, have all taken a step down this calendar year.

BHP share price is down some 16 per cent to $42.10 so far this year, Rio Tinto is down some 15 per cent while FMG is down almost 30 per cent from where it was trading at the beginning of the year.

So, what has happened to drag down their prices like this?

All three miners are predominantly iron ore miners, and all three miners are among the more efficient and well-run mining companies in the world, digging up high grade iron ore in the Pilbara for about $US 20- 30 a ton and selling it for between $US 110 and $US 130 a ton.

Importantly, both Rio Tinto and BHP are expanding their copper operations, holding some of the best copper deposits in the world in their list of tenements while Fortesque is leading the world in developing green hydrogen technology and making ‘green steel’.

Needless to say, there have been some economic headwinds that even these world leading companies have had to respond to. BHP for example has been very proactive in closing its nickel mines in Western Australia in response to falling nickel prices around the world.

Fortesque Metal has come up against the hard reality that there will be costly mistakes to be made in the transition to a green energy supply and in response, they too are cutting back hard on some of their ambitious targets.

All three have been hit by the rising cost of doing business in Australia and by volatility in global commodity markets and political uncertainty as wars continue in the Middle east and Ukraine.

Is this a time to give up on Australia’s big three mining companies?

No. One of the hardest lessons to learn when investing money is to look for solid, well managed investments and then to take advantage of any weakness in their share price to buy quality companies on the cheap.

With big miners, market logic says you should sell them when commodity prices are soaring and buy when prices are languishing. Easy to say but so hard to implement, even when it is so obvious this is the way to go.

I believe all three companies are well managed world leaders and have a place in every Australian share portfolio. More, all three are generating strong, high yielding returns for investors.

The recent falls in their share prices are merely an opportunity to buy into these quality stocks at what are increasingly looking very attractive prices.