Miners are once again the talk of the town, but this time round, consolidation has not taken centre stage. It is a Goldman Sachs note that has made waves, sending most mining groups down, despite an otherwise content FTSE 100, up a small 8.1 points at 6372.3.
Shares in Anglo American, for example, have fallen 120p, or 3.8%, to £30.60, and Vedanta Resources is down 70p, or 3.3%, at £20.69.
The reason? Goldman Sachs analysts predict the recovery of metal prices will be delayed into 2009, which is bad news for mining companies.
Analysts say in the note: "Recent downgrades from our economists for China, Europe and the US imply that we expect a period of weaker than consensus global growth in 2008, at 4%, before a gradual return to trend in 2009 at 4.2%.
"In line with this view, our base metal price forecasts have been reduced significantly for 1H08. However, we expect prices to begin recovering in 2H08. The downward revision to our base metal forecasts leads us to decrease our earnings forecasts and price targets across our coverage universe."
But they add that ongoing industry consolidation should keep valuation multiples inflated.
Xstrata, however, is still their favourite stock, given the potential M&A. The company has long been an aggressive acquirer, but recently, it has been rumoured to be of interest to mining giants like Anglo American or Brazil's Vale, formerly known as CVRD.
Vedanta, however, has been downgraded to sell, due to its large exposure to copper, zinc and aluminium.
