SFR drops 10% in 2 weeks, now enjoy the ride back up, page-12

Strong buy from Goldman Sachs for SFR and OZL to name a few.



Resources: Digging for dollars

After a "pretty terrible" 2015 and a transition year in 2016, listed miners really hit their straps in 2017, says Goldman Sachs analyst Craig Sainsbury, who took out the gong for best stock picker in the metals and mining sector.

Unlike retailing, where dodging the landmines played a large part in how you performed, the story was much more about picking the best of a broadly higher market. Commodity prices went up, corporate balance sheets improved and capital returns increased.
A renewed focus on capital discipline for the miners – which may have been lacking over the past five or 10 years following some ill-timed acquisitions – has been "a huge driver of interest back into the sector" in 2017, Sainsbury says.
"I think the miners have regained that trust back from global shareholders, and hence people have been willing to look again at the space and invest capital."
In a year where most investors have done well from the theme, Sainsbury thinks it was getting the calls right in the lesser-known names that have helped beat the market.

Most investors are happy to buy Rio Tinto and BHP, but names that haven't been as heavily scrutinised by the funds management community, such as South32, Alumina and Iluka Resources, are the ones which have really shone, Sainsbury says.
"It's the mid-cap space that tends to come back into vogue when the sector is strong," he says.
And Sainsbury sees solid returns again in 2018 from South32 and Alumina.
"I think both will benefit from very strong balance sheets, exceptionally good cash flow, and in our view sector-leading levels of capital return back to the market."
Copper remains most people's favourite commodity, Sainsbury says, and "with good reason given very strong demand growth and a lack of identifiable supply growth over the next two or three years".
"So guys like OZ Minerals, even though they are in a phase of growth in developing [the] Carrapateena [mine], I still think will perform very strongly. It has strong fundamentals, strong cash flow generation and is inexpensive in a mining context." Sandfire Resources is in a "similar situation", he says.
"They are the stocks where we have strong buys and where we would see the most upside over the course of 2018."


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