Strong profits from operations reinforced a view that the mining boom is gathering strength as the western world rushes to develop an ABC (Anything But China) supply chain.

Cash from operations was matched by a fresh round of capital raisings with a quick check showing that about $1 billion in new capital flowed into mining stocks this week, continuing a trend which has been strengthening for two years.

BHP kicked off the profit season with first half earnings of US$5.6 billion (up 28% on the opening half of last year) with copper, for the first time, topping iron ore.

The world’s biggest miner also joined the capital raising rush with the sale of future silver output for US$4.3 billion, earmarking the proceeds for South American copper projects.

While not every investor’s favorite miner, BHP’s latest result sent a powerful signal that resource companies are going up as technology stocks fade after their stellar performance last year.

This changing of the guard effect could be seen in comments from stockbrokers such as Barrenjoey’s remark that BHP is on “a stairway for copper heaven,” accompanied with an upgraded price tip from $51 to $54, a target promptly matched on the market before a late fade to $53.36, up 4%.

That rise by BHP, the most valuable company on the ASX, helped the overall market rise to an all-time high as measured by the all-ordinaries index which added 1.4% this week, taking its rise since the start of the year to 3.5%.

After BHP’s market moving profit and side-deal in silver, came a string of mid-tier miner reports, including:

  • Local lithium leader PLS, formerly Pilbara Minerals, lifting its underlying first half pre-tax earnings by 240% to $253 million, helping the stock add 12c over the week to $4.37.
  • Copper miner Sandfire Resources increasing its underlying pre-tax profit for the opening six months by 19% to US$304 million which helped deliver a 9c share price rise to $19.01.
  • Gold miner Genesis Minerals lifting its pre-tax profit for the first six months by 172% to $418 million, followed by a 39c increase in the company’s share price to $7.07, taking its rise over the last six months to $2.74 (62%).
  • Iluka Resources slipped to a loss of $288 million after heavy write-downs associated with the construction of a rare earth processing plant in WA, and
  • IGO Group reported a first half loss of $34 million which was a dramatic improvement on the loss of $782 million in opening six months of last financial year. On the market, IGO was 22c weaker at $8.13.

Capital raisings, as mentioned earlier, enjoyed strong investor support thanks to the buoyant outlook for commodity prices with significant capital injections enjoyed by:

  • Copper developer Marimaca, which is listed in Australia and Canada, pulling in $423 million to expand operations in Chile.
  • Gold project developer Horizon Minerals raising $175 million to fund the redevelopment of the Black Swan ore processing centre in WA.
  • New Zealand focused gold developer Santana Minerals raising $130 million to fund its Bendigo Ophir gold project.
  • Gold miner Westgold Resources launching a prospectus to raise $75 million to fund the demerged Reedy and Comet projects.
  • Austral Resources raising $65 million to fund expansion of its Rockland and Mt Kelly copper projects in Queensland, and
  • Copper explorer Prospect Resources raising $45 million for work on its Mumbezhi project in Zambia.

Cash is the lifeblood of every business and with mining today there is a double stream of cash flooding the industry as profits grow and investors throw money at almost any company with a mining asset.

Gold this week slipped below the US$5000 an ounce mark early before staging a fightback as the U.S. moved its forces closer to Iran, which is threatening to blockade the world’s most important oil shipping route through the narrow Straits of Hormuz.

A midweek dip to US$4852/oz was followed by a brief peek above US$5000/oz before fading again. By Friday morning it could be anywhere especially if the U.S. and Israel launch a major attack on Iran, which is what the war hawks are calling for and which is given a 90% chance of starting soon.

Genesis, as mentioned earlier, was one of the top gold stocks with its rise of 39c to $7.07 with leading investment bank UBS lifting its price target from $10 to $10.75 thanks in part to the proposed acquisition of near neighbor Magnetic Resources which rose by 37c to $1.99, and could go higher if South Africa’s Gold Fields joins the bidding.

Other gold moves included:

  • Catalyst, up 69c to $8.25 after announcing the acquisition of a large tenement adjoining its Plutonic in WA. Bell Potter upgraded its 12-month price target from $13.50 to $14.60.
  • Alkane Resources, up 18c to $1.68 after reporting a strong first half profit. Bell Potter is tipping a full (June 30) year pre-tax profit of $468.8 million, up significantly on last year’s $93 million thanks to its merger with Mandalay Resources.
  • Ausgold, up 2c to $1.05 after signing a cooperation agreement with an Aboriginal group close to its Katanning gold project in WA, and
  • Strickland Metals, up 1.8c to 23c after reporting strong assays from its Gradina project in Serbia with a best hit of 60.8 metres at 1.9 grams of gold a tonne from a depth of 798.2m.

Capstone Copper was the best of the copper stocks with a rise of 34c to $13.78 despite weaker than expected first half production. Morgans downgraded its price target from $17.40 to $16.60 but stuck with a buy tip.

FMR Resources was the best of the copper explorers with a rise of 9c to 29c after reporting encouraging assays from the first hole in its Goschen prospect in Canada.

Aeris Resources was upgraded by Bell Potter after a deal with Peel Mining which will extend the life of its Tritton project. The stock rose by 1c to 52c while the broker lifted its price target from 82c to 90c.

Other news and moves included:

  • Returning interest in uranium stocks led by Paladin which added $1.19 to $13.09 after a site tour of its Namibia operations by investment bank analysts. CG Capital Markets set a price target for the stock of $16.
  • Bannerman Energy, another Australian uranium stock with operations in Namibia, rose by 29c to $4.06, within sight of the $4.70 price target of Shaw and Partners.
  • Ioneer, which is planning to develop the Rhyolite Ridge lithium and boron project in the U.S. slipped 1c lower to 14c but retained a buy tip from Bell Potter which has a price target of 39c on the stock.
  • Tin mine developer Elementos added 7.5c to 42c after raising $29.5 million in a placement to boutique investment bank L1 Capital.
  • Niobium explorer WA1 Resources rose by 60c to $15.88 after the publication of an upbeat assessment of the market for the thinly-traded metal from CG Capital Markets which lifted its price target on the stock from $28 to $32.
  • Chalice Mining slipped 1.5c lower to $1.88 despite initiation of coverage of the palladium, nickel and copper develop by CG which set a price target of $3.70, and
  • Alligator Energy rose by 0.7c to 4.7c after announcing completion of commissioning of a pilot plant at its Samphire uranium project in the Northern Territory.