You could easily be forgiven for thinking that mining is on the rocks after a dismal 2013, dominated by low commodity prices and plunging share prices as investors rushed for the exits.

But a clear-headed look at the recent half-year profit season paints a different story than some of the “sky is falling” headlines beloved by east coast newspaper editors.

Yes, nickel and gold miners have been hammered by lower prices, reflected in poor financial results from the likes of Newcrest, Silver Lake Resources and St Barbara.

Silver Lake, for instance, posted big losses on its now mothballed Murchison mine and was forced to raise $A39 million in a discounted share placement last week.

And despite strong operating profits at the Mount Monger operation, some analysts reckon the gold producer remains on life support with a further equity raising likely in coming months.

St Barbara, meanwhile, plunged deeper into the red after booking more write-downs from its questionable Allied Gold acquisition from 2012.

Yet Morgan Stanley painted a much rosier picture than that gleaned from some of the individual stock misfortunes.

After analysing results from 21 Australian Securities Exchange-listed miners under its coverage it concluded that the December half was a “positive period” for the stocks.

“Considering the macro setting is still dull, the financials results were sound,” the bank said.

It added that revenues were, on average, up 5% (mostly from volume additions) and costs were down by 3%.

“Margins are improving and gearing is falling, [capital expenditure] has peaked but collective output is rising as projects are delivered,” MS said.

Admittedly, the survey included highly profitable bulk commodity miners BHP Billiton, Rio Tinto and Fortescue Metals Group, while Silver Lake and St Barbara weren’t among the mid-caps covered.

But in a broader sense, MS doesn’t see much fiscal stress across the sector.

“Certainly there are some instances, such as Newcrest, where we have previously identified the need for the existing debt repayment to be pushed out but overall the sector looks to be in a manageable fiscal position.”

And mid-cap miners, generally carrying less gearing than their bigger cousins, offer investors plenty of leverage should sentiment improve.

“Currently we see the mid-cap miners offering twice the upside of the large cap miners,” it said.

“In our view, FMG can rapidly pay down debt, Whitehaven Coal can deliver significant growth, Newcrest’s operational performance is turning, OZ Minerals has fundamental value and Western Areas has sound economics.”

There is certainly plenty of room for improvement, given the dismal share market performance of mid-caps over the last 12 months.

Iluka was relatively flat over that timeframe but the remainder lost between 8% and 60% of their market worth, according to MD’ back-of-the-envelope calculations.

But the tide has turned for some of late, with nickel miner Panoramic enjoying a 70% share price leap in the second half of February, despite booking a $23 million interim loss.

That’s a direct result of positive hits from its Savannah North drilling, which has raised expectations of major life extensions at the Kimberley minesite.

It’s a good reminder of the drill bit’s power to generate forgiveness for most other corporate misfortunes.

But UBS is not getting too carried away with the possibility of Panoramic outlining an offset “repeat” orebody at Savannah.

With the company expected to benefit from the ongoing Indonesian export ban, further momentum is likely if additional drillholes show that the Savannah North discovery is a replica of the main deposit.

“However, it would be remiss of us not to highlight the potential downside should drilling results disappoint,” it said.

Most other mid-caps won’t be able to rely on the drill bit to turn around their fortunes this year.

The industry belt-tightening focus on cash flow has started to pay dividends.

But small and mid-cap miners remain at the mercy of broader market forces, no matter how much fat they cut.

Chinese political leaders are preparing for a couple of key policy sessions this week amid increasing pressure for the government to take action on Beijing’s smog – a debilitating legacy of the country’s recent once-in-a-lifetime construction boom.

Miners should also be keeping a wary eye on unfolding events in Ukraine, as a belligerent Russia threatens a resumption of cold war hostilities with the West.

Gold prices may benefit from all the political tension but other commodity prices look vulnerable if big investors keep dumping higher-risk assets for the safety of the US dollar and treasury notes.