The fall of Australia's mining companies

The S&P/ASX 300 Metals & Mining Index has dropped 48% in the past 4 years – here's the evidence

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published March 18, 2015 12:14 pm AEDT

During the mining boom, commodities prices were soaring as China's growth soared. It seemed like a great time to own an Australian resources company – virtually any one.

Unfortunately, today is not.

Iron ore prices have halved, oil prices the same, while many other commodities have tumbled, including coal, gold, copper and nickel, taking Australia's listed mining stocks with it – as you can see from the four-year chart of Australia's Metals & Mining index below.

Source: Google Finance

That's not all, of course.

The Fukushima nuclear disaster in 2011 has seen uranium prices tumble and have never really recovered. Mind you, looking at a 20-year chart for the commodity suggests current prices are the 'new normal', and expectations of US$70 or more per pound into the future were clearly wrong.

Max Uranium Price Chart - Uranium Price Per Pound

No wonder Paladin Energy Ltd (ASX: PDN) and Energy Resources of Australia Limited (ASX: ERA) have seen their share prices plunge by more than 90% in the past five years.

Nowhere is it more clearer that Australia's mining stocks are out of favour than the fact that Rio Tinto Limited (ASX: RIO) is no longer even in the top 10 largest stocks on the ASX by market capitalisation. The predominantly iron ore miner is now in eleventh place. Even BHP Billiton Limited (ASX: BHP), the largest resources company in the world, is now in fourth place, behind three banks.

And there is further evidence of the general decline in mining stocks with the recent S&P quarterly review of the ASX indices. Two resources-related stocks were dumped from the top 50, Iluka Resources Limited (ASX: ILU) and WorleyParsons Limited (ASX: WOR) and replaced by Seek Limited (ASX: SEK) and Medibank Private Ltd (ASX: MPL).

A similar pattern emerges in the Top 100, with Mineral Resources Limited (ASX: MIN) and Monadelphous Group Limited (ASX: MND) dumped from the S&P/ASX 100 (Index: ^AXTO) (ASX: XTO). The S&P/ASX 200 was the same, with 6 mining stocks given the boot, replaced by 5 industrials and 1 resources company.

The story repeats for the S&P/ASX 300 and the All Ordinaries indices.

Clearly, the time of the miners is over, for now. The problem for investors is trying to work out when to on hop back on board the resources train, if ever again.

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