A new report from PricewaterhouseCoopers says that in the first half of 2013 Chinese investment in Australia’s mining sector ground to a halt, however the world’s second largest economic powerhouse directed investment toward other sectors, in fact boosting its spending in the nation. 21 per cent of the $32 billion of outbound investment from China was into Australia in the first half, an increase of 9 per cent from the previous six month period. This is significant, as China’s global investment activities were actually lowered in the period, to the tune of 31 per cent compared to the second half of 2012. Despite this, outbound investment towards Australia was the highest of any half year period since 2007, the year the Chinese began to make significant investment into Australia.
The report says investment into the Australian mining sector had come to a virtual standstill during the surveyed period, with only three mining deals announced. They had a combined value of $US53 million, a far cry from $US2.9 billion worth of deals over the same period in 2012. According to the reports author, PwC’s Asian desk leader Andrew Parker, an expectation exists that with Chinese economic activity slowing down Australia will see a decrease in Chinese investment. "Everyone in the world is sitting on the sidelines in the mining industry and China is no exception, they are being more cautious," Mr Parker said.
Non-resources deals from China have ballooned from 17 per cent of their total global investment in 2011 to 39 per cent last year, a level which was maintained in the first half of 2013. Looking ahead, Pwc expects Australia to receive fewer but larger and more strategic resource sector deals from Chinese state-owned groups in the second half of the year, while the Chinese private sector will target an expanding volume of non-resource deals.
Commentary
FNN asked AMP Limited's
(ASX:AMP) AMP Capital Chief Economist Shane Oliver if he believe’s China’s apparent economic slowdown is a risk:
“I think the reality of China is that it couldn’t grow at 10 per cent forever. Now that was ok through the years of the previous government in China, run by Wen and Hu, they’re now gone and the new leadership in China is I think much more focused on balanced growth- which probably means growth down around 7 - 7.5 per cent- that sort of range, rather than 10+ per cent. And that I think is likely to be more sustainable for China, and probably less likely to lead to social tension. So I think you’ve got to forget about the 10 per cent growth coming out of China; we may get it one year if we’re lucky but I think the broad average is probably going to be around 7 – 7.5 per cent. Which has an implication of course as it means less incremental demand for commodities than we becamse used to, but it’s still a reasonable environment. It’s not the Chinese economy collapsing, it’s just the Chinese economy settling down to a more sustainable growth rate.”
Company headlines
Ausdrill Limited
(ASX:ASL) shares have jumped in early trade despite a 19.4 per cent fall in its full year net profit of $90.4 million, weighed down by one off costs. The mining services firm says it is optimistic about work in the current year, as it embarks on a cost review amid falling commodity prices and uncertain demand. Shares in Ausdrill are trading up 15.81 per cent at $1.47.
Newcrest Mining Limited
(ASX:NCM) has confirmed it will delist from the Toronto Stock Exchange, after setting up its listing in early 2012. The gold miner says very few shares have been traded on the index, and given it is now trying to cut costs, the delisting was a logical move. Shares in Newcrest are trading down 3.06 per cent at $13.32.
BHP Billiton Limited
(ASX:BHP) chief executive officer Andrew Mackenzie is seeking a strategic partner in its $US15 billion Jansen Canadian potash project, according to media reports. Mr Mackenzie says the group is looking for a partner who will add value, and has reportedly already held discussions with parties about selling a stake in the asset.
Boart Longyear Limited
(ASX:BLY) swung to a half year net loss of $US329 million, down from a net profit of $98 million for the same period last year. The interim result comes after the company wrote off $175 million in goodwill and intangible assets and $42 million in rigs and acillary equipment in its drilling segment. In total the company incurred $US315 million in charges related to restructuring and impairments.
Silver Lake Resources Limited
(ASX:SLR) plans to raise $47.5 million through an underwritten placement of 55.9 million fully paid ordinary shares at $0.85 per share. The gold miner will also attempt to raise a further $15 million through a Share Purchase Plan, with funds raised to be directed towards debt facilities and the provision of working capital.
Beach Energy’s Limited
(ASX:BPT) full year net profit has slipped to $153.65 million as lower oil prices dragged on revenues. Despite the hardships, full year revenues still rose to $700.5 million, boosted by higher sales volume. Revenue boosts were offset by royalty payment increases, higher depreciation charges and carbon tax payments. Beach says production rose by 7 per cent to 8 million barrels, contributing to an operating cash flow of $264 million.
