FNN speaks to Fund Manager Ausbil about the outlook for the resources sector. Mining companies making news include BlueScope partnering with Nippon Steel, Paladin inking a supply deal
, Sundance Resources still in talks with its suitor Hanlong Mining and Sabre Resources revealing a new copper discovery.
Resources news Mining wages rise
The mining sector continued to deliver higher wages over the year to May. The Australian Bureau of Statistics has reported the average weekly wages in the sector rose 7.6 per cent over the year, compared to a 0.8 per cent fall in manufacturing wages. The mining sector also delivered the highest weekly wages in Australia, averaging $2,274.
Mining boom masking soft productivity
Australia’s reliance on the mining boom is masking falling productivity, according to a McKinsey Global Institute report. The institute says the Australian economy has switched from being productivity-driven to being “boom dependent” which is making the nation vulnerable. The institute believes Australia can counteract this threat through a concerted effort to restore productivity as the primary engine of growth.
Deals BlueScope partners with Nippon Steel
BlueScope Steel Limited
(ASX:BSL) has formed a $1.4 billion joint venture with Japan’s Nippon Steel Corporation. The new joint venture company will be headquartered in Singapore and enable BlueScope to tap into Asia’s construction sectors. Under the deal Nippon Steel will acquire 50 per cent of BlueScope’s interest in Asean and North American building products sectors for which BlueScope will receive $US540 million.
Hanlong reportedly cuts offer for Sundance
China’s Hanlong Mining has reportedly cut its $1.7 billion takeover offer for Sundance Resources Limited
(ASX:SDL) by 21 per cent. In the wake of softening iron ore prices numerous reports have emerged claiming Hanlong has cut the offer price from 57 cents per Sundance share to between 40 cents and 45 cents. The West Africa focused iron ore developer is still in talks with its suitor and shareholder regarding a reasonable acquisition price.
Paladin inks $US200M supply deal
Paladin Energy Limited
(ASX:PDN) has struck a supply deal with an undisclosed major utility which will see Paladin receive a $US200 million prepayment. The uranium miner’s says the six year off take contract will see it deliver 13.73 million pounds of uranium between 2019 and 2024 from its current African mining operations or a project yet to be developed. Paladin has described the deal as a major achievement.
Discoveries Sabre surges on copper discovery
Shares in Sabre Resources Limited
(ASX:SBR) surged 260 per cent on the same day the mineral explorer announced a copper discovery. Sabre says drilling has intercepted extensive copper mineralisation from surface at the Guchab copper mining centre, within its Otavi Mountain Land copper project in Namibia. The first diamond drill hole at Guchab has been described as a great success and an exciting start to the drilling programme.
Resources sector outlook FNN asked Ausbil Dexia Limited CEO and Head of Equities Paul Xiradis, about his outlook for the resources sector.
“There’s no doubt that demand has weakened, but equally we are seeing cut backs in supply as well. If that is the case, that will be reasonably supportive for commodity prices in the shorter to medium term,” Mr Xiradis says.
When assessing opportunities in the mining space Mr Xiradis says investors must consider the production profile, “Those groups which are showing good production growth and reasonably good commodity prices, that’s where you’ll see the earnings growth and hence the valuation uptick.”
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