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RPT-Mining sector sheltered from Brexit shock by gold and dollar strength

Published 24/06/2016, 10:21 pm
RPT-Mining sector sheltered from Brexit shock by gold and dollar strength
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(Repeats to add PIX to packaging slug)

* Mining sector falls less than blue-chip FTSE 100 index

* Uncertainty complicates debt and M&A activity

* Large mining companies had opposed British exit from EU

BRUSSELS, June 24 (Reuters) - Big mining companies found some shelter from the shock of Britain's decision to leave the European Union from Friday's rare combination of stronger gold and a relatively strong dollar.

The overall mining sector .FTNMX1770 fell 2.5 percent while the blue-chip FTSE 100 index was down 4.6 percent by 1230 GMT. gainers were gold producers Randgold Resources RRS.L and Fresnillo FRES.L , whose share prices climbed by 19.4 percent and 12.5 percent respectively while Gold XAU= rose by about 5 percent as traders sought a store of value and sterling sank to its lowest in decades. a vote for the unknown, but the miners are mostly dollar earners. It doesn't make much difference," Investec analyst Jeremy Wrathall said.

For the longer term, however, the uncertainty resulting from a so-called Brexit could also thwart miners' efforts to sell assets to reduce debt. Merger and acquisition activity had already slowed to the lowest since records began during the run up to the referendum. the miners, one of the weakest performers was Glencore GLEN.L , down 7 percent. Analysts said the company's high level of debt makes it vulnerable in uncertain times, though the upheaval could create arbitrage opportunities for its trading operations.

Glencore declined to comment.

Many big mining companies, in common with other corporates, had opposed a Brexit, warning of the risk of economic weakness.

The referendum result also raises the prospect of the need for inconvenient renegotiation of any contracts agreed under EU law, analysts said.

Rio Tinto RIO.L and BHP Billiton BLT.L issued statements saying their businesses remain robust.

"We do not foresee any significant impact on our business in the short term, but we will continue to monitor this in the medium to long term," Rio said in an emailed statement.

The BHP statement said: "BHP Billiton is resilient and has the right commodities mix and balance sheet strength to withstand periods of increased volatility."

BHP Billiton CEO Andrew Mackenzie had previously spoken of the benefit to the company of Britain staying in the European Union, citing its high standing with biggest customer China.

"My dealings with the highest level of the Chinese government suggest China takes Britain far more seriously because we are EU members," he said.

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