LONDON (ShareCast) - Strong gains for FTSE 100 (FTSE: ^FTSE - news) gold producer Polymetal weren't enough to lift the mining sectors into positive territory on Friday afternoon, as the majority of resource stocks bore the brunt of a fall in risk appetite.
Most mining heavyweights in London were providing a drag, with EVRAZ, Kazakhmys (LSE: KAZ.L - news) , ENRC, Antofagasta (Other OTC: ANFGY - news) and Rio Tinto (Xetra: 855018 - news) among the worst performers.
Anglo American (LSE: AAL.L - news) declined after saying that strikes held back production of platinum and iron ore in the fourth quarter.
"The Chinese growth story will remain a primary focus for mining and resources traders in 2013, but increasingly the ability of blue chip miners to overcome political constraints and manage their relationships with their workforces in Africa is becoming a key consideration," said Matt Basi, a sales trader at CMC Markets.
"Anglo shareholders will be keen to see the board working to address these issues in the early part of 2013."
AIM-listed gold miner Avocet dropped sharply after saying that the volume of gold produced in the fourth quarter fell 7.0%. Sector peer Triple Plate Junction was also a heavy faller after saying that its joint venture partner in Papua New Guinea would be stopping its search for large bulk tonnage gold/copper porphyry systems at their project.
Steel market a concern
Also weighing on sentiment in the mining sector today were comments made by UBS (Berlin: UBRA.BE - news) analyst Carsten Riek about the European steel sector. He said that the steel market is to cool down this year.
"We do not share the market's view that the EU steel industry will see a major recovery in profitability. Indeed, on our forecast, we see EU steel demand contracting again in 2013 by 1.7% year-on-year, as we see little support from at least two of the three major sectors (construction, auto and capital goods) driving steel demand."
He also said that there is little likelihood of steel price increases exceeding the recent iron ore price rally, and that an appreciating euro could curb exports, putting more pressure on steel production.
Polymetal bucks the trend
Precious metals group Polymetal was bucking the trend, rising 2.02% on speculation that it could merge with smaller peer Polyus Gold (+2.06%), after a Bloomberg article said that one of the latter's shareholders has agreed to sell a 37.8% stake in the firm to an unknown party.
UBS upgraded Polymetal to 'buy' this morning, saying "now is the right moment to use weakness in the stock price as potential merger with Polyus Gold may be a strong driver".
Meanwhile, Credit Suisse (NYSE: CRP - news) said that a tie-up could lead to a re-rating: the broker said: "A combined company would have better liquidity, a larger share in the index, a wider investor base and would sit among the global gold majors".
Xstrata (Other OTC: XSRAF - news) was also slightly higher after reiterated that its Las Bambas copper project in Peru hold "substantial value". The firm reiterated its definite cost estimate for the project at $5.2bn.
Top performing sectors so far today
Household Goods & Home Construction 8,890.87 +1.18%
Fixed Line Telecommunications 2,954.46 +1.04%
Travel & Leisure 5,663.30 +1.03%
Software & Computer Services 998.98 +0.97%
Personal Goods 21,746.34 +0.91%
Bottom performing sectors so far today
Industrial Metals & Mining 3,119.43 -1.82%
Mining 19,942.23 -0.89%
Industrial Transportation 2,454.30 -0.41%
Real Estate Investment Trusts 2,231.20 -0.31%
Electricity 8,764.72 -0.24%