No Taste Like Liquidity for Global Mining Stocks

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As fears ease over the global credit markets crisis, the world's top 40 mining and oil stocks clawed back nearly USD 400bn worth of market value in just three days.

As fears ease over the global credit markets crisis, the world's top 40 mining and oil stocks clawed back nearly USD 400bn worth of market value in just three days....Friday's price recoveries were widespread. News of the US plan started to filter out late on Thursday; on Friday alone, both the Shanghai Composite and the Hang Seng rose by nearly 10%; the Dow Jones finished 3.4% higher, after London had jumped nearly 9%. The top 20 oil majors rallied by an average of 9%, compared to an average rally of 13% for the top 20 mining stocks. Norilsk gained the most, at 30%, followed by a 27% gain for ENRC and a 19% recovery for Xstrata.

While these one-day gains represent widespread relief for any number of investors, the world's top 20 mining stocks remain, on weighted average, 46% below stock price highs...

The 30 components of the Dow are currently capitalised at a total of USD 3.7 trillion, and trade at an average of 36% below highs; the world's top 20 oil stocks reflect numbers of USD 2.2 trillion and 32% below, respectively, while the top 20 mining stocks reflect numbers of USD 880bn, and 46% below, respectively.There has been significant and growing debate over the extent to which resources stocks are oversold, and general consensus that market valuations are well below intrinsic value, regardless of the kind of methodology is thrown at the exercise. While the very biggest mining stocks currently trade on average just better than half of record levels, the junior mining sector remains in a valuation, and thus liquidity, crisis.

A selection of 44 listed junior platinum stocks shows prices currently trading at 67% below peak levels, on a weighted average basis; for 100 listed junior uranium stocks, the number computes at 70% below; for 112 listed gold developers, 60% below is coughed out as the prevailing number; for silver, 21 and 69% below peaks...

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