Committed investment back to dark ages: BREE

Resources Corner

After hitting its peak last year, committed resource sector investment in Australia is on a downward course in the near term, according to the Bureau of Resources and Energy Economics (BREE) bi-annual Resources and Energy Major Projects report.
 
BREE forecast two possible five year scenarios for the sector, one of which forecasts a downturn in investment on the back of the conclusion of ‘mega projects’ in the sector.  According to BREE, the stock of committed investment is expected to decrease by $8 billion this year, before tumbling by $63 billion in 2015, reverting to levels comparable to 2007.
 
$150 billion worth of high-value projects have been cancelled across Australia in the first four months of the year, and challenges remained for future investment. The report indicated current committed investment value was sitting at $268 billion, holding its levels from October 2012, despite 14 projects being cancelled across the country. Interestingly, 11 per cent of total committed investment is attributed to cost increases to existing projects. 
 
BREE believes opportunities remain for Australia to generate increased levels of committed investment despite the likely decline, hinging on the progression of current possible projects to committed status. 
 
Economic news
 
Manufacturing in the world’s second largest economy shrunk for the first time in seven months in April. The HSBC flash China manufacturing PMI came in at 46.6, sinking below 50 for the first time since October which indicates contraction in the manufacturing sector. The preliminary read renewed concerns about the strength of China’s economy and comes ahead of the final read expected next week.     
 
Commentary
 
FNN asked John Noonan, of Thomson Reuters, for a snapshot into a possible internally focused future direction of Chinese growth:  
 
“There’s also a plan in China, with the new leadership, to transition the economy away from the cheap labour, cheap export model and more into a domestic consumer focus. So with the size of the population, the growing middle class the growing wealth in China, they believe they don’t have to be as dependent on the rest of the world if their domestic economy is quite strong and quite vibrant, if there’s enough consumer potential in China to get their growth.”
 
The thing about Newcrest 
 
Newcrest Mining Limited (ASX:NCM) has lashed out on private explorer Gold and Copper Resources for launching legal action against it in order to retrieve land.
Following the action, the NSW government is currently reviewing one of Newcrest’s exploration licenses. Though the license will remain valid while under review, Newcrest says it considers all actions to be without merit and will continue to vigorously defend them.
 
Newcrest about the thing
 
Newcrest says it’s confident the exploration licence will be re-confirmed, and is fighting the legal action by Gold and Copper Resources. A Newcrest spokeswoman told media the company is confident that a review of the reasons to support the licence renewal will lead to a reconfirmation of the special circumstances. The licence in question was originally issued by former resources minister Ian Macdonald, and then renewed in 2011. It takes in about 70 per cent of Newcrest's exploration area in NSW.
 
Meanwhile... in the rest of the sector

BHP Billiton Limited (ASX:BHP) is scaling back growth projects in its coal division in the short to medium term and may consider selling more assets. The global miner says it’s expecting capital expenditure to peak in 2013, and had no new major projects planned.

Fortescue Metals Group Limited (ASX:FMG) is likely to focus on Brockman Resources Limited (ASX:BRM) ability to fund additional infrastructure to argue against the junior's attempts to use the miner's railway. A Fortescue spokeswoman told media The Pilbara Infrastructure has to ensure any applications for rail access are compliant, in order to ensure other third parties are not disadvantaged.
 
Sundance Resources Limited (ASX:SDL) is fielding approaches from  a number of interested parties about the development of its Mbalam-Nabeba Iron Ore Project. Proposals include the potential for some groups to provide port and rail solutions through to direct investment in the project. 
 
Woodside Petroleum Limited (ASX:WPL) and its partners in the Browse LNG project are expected to announce plans to move forward with a floating LNG plant development. Woodside has reportedly determined that building one or two floating LNG plants is the preferred option.
 
New Hope corporation Limited (ASX:NHC) has responded to the downturn in the coal market by further cutting output at its West Moreton operations in Queensland. Output has been reduced from 1.1 million tonnes to 700 thousand tonnes annually following a shift from a six day to a five day per week operation. 
 
Karoon Gas Australia Limited (ASX:KAR) has completed its three well Santos Basin exploration campaign, at a total net cost of $30 million. The hydrocarbon explorer made two potential commercial oil discoveries, which CEO Bob Hosking says have dramatically improved the prospects for discovering oil in other targets within its offshore blocks in Brazil. 
 
Mining IPOs
 
Classic Minerals Limited NPV (ASX:CLZ) started trading on Friday, 24th May. The base metals explorer listed with an issue price of $0.20, opened at $0.15 but dropped more than 10 per cent over the session to close at $0.13 on its first trading day.