Mining Semester 2 Report


Position Company Profit
Long Medusa £453.10
Short Beowulf £476.40
Long Randgold -£2,565.55
Short Index £29.04
Long Fresnillo £67.00
Long AngloAmerican £696.80
Long BHP £213.80
Short AngloAmerican £37.44
Short Beowulf £5,564.95
Long Fresnillo £352.45
Short Medusa £1,463.10
Long Beowulf £2,168.00
Long AngloAmerican £760.00
Long ABG -£1,207.50
  Profit £8,509.03

This semester has been a big step forward in refining our investment strategy. Throughout the semester we conducted in depth analysis of individual companies looking at the company’s prospects and comparing various ratios such as P/E and EPS. The table above shows the trades we made in chronological order according to the date they were closed.

To begin with we used only broad macro-economic theories to make investment decisions. In light of the Egyptian crisis and a continued rally in gold price prices, we took the view that the price of gold would keep on rising. Hence we chose two large specialist gold mining companies to invest in, ABG and Randgold, and took up relatively large positions in these.

This turned out to be our worst decision of the semester, with the relatively peaceful removal of President Mubarak gold prices retreated. Also civil war in the Ivory Coast escalated endangering Randgold production (it’s mine there produces 1/3 of its output). ABG was demoted from the FTSE 100, having a profound impact on its share price (presumably as the company was sold off from tracker funds and became less prestigious). ABG and Randgold lost 10% in a week and 2 days respectively; a prime example of buying at the top, just before a fall. We were however conscious of not crystalising our losses and held onto these stocks until they recovered to a more suitable level.

Since then we have been playing catch up and have looked further into the behaviour of the mining sector. What has become immediately obvious is the extreme volatility of the mining sector and because of this it appears mining stocks are treated often just as risky assets. Hence when the market becomes bearish investors reduce their exposure to mining companies first. Due to the continued global geopolitical uncertainty mainly due to the earthquake in Japan and the continued unrest in the Middle East; it could be said that we became more cautious in our approach, seeking diversification and only exposing ourselves to small positions. As well as company research we began to look at trends in the share price and try and take advantage of this short term volatility.

Overall Performance

In the final phase of our activities our investment strategy really came together as we built on previous ideas and had gained more of an understanding of the companies that we continued to research and their value. As such we took larger positions and acted with real confidence in our decisions. Overall we managed to claw out of our initial losses and make a respectable profit of 8.47%, up 9.72% on the FTSE350 mining index over the same period.

Opening Balance £100,000.00 Change 8.47%
Closing Balance £108,465.08 FTSE Mining -1.25%


Graham Ward & Adrees Nazir

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