The total value of investment projects has fallen for three consecutive quarters for the first time in a decade, fuelling concerns that non-mining sections of the economy will effectively pick up the slack of a waning resources investment boom. The latest Investment Monitor report from Deloitte Access Economics states that it is clear the investment in the resources sector which has underpinned growth for the best part of a decade is fading. The report goes on to recommend that government infrastructure spending must be encouraged, adding that the driver of medium term growth remains unclear at this stage. Deloitte says that despite record low interest rates, retail spending continues to be soft with few signs of a revival, while non-residential building activity remains inconsistent and shaky. The total value of non-residential work commenced in the last 12 months is reading at its lowest level since immediately after the Global Financial Crisis back in 2008-2009 is at the time, Kevin Rudd’s Labor government sought to kickstart things and boost activity by rolling out its school building program.
Fast forward almost five years, and Deloitte Access Economics partner Stephen Smith is saying that once again public infrastructure spending can play an integral role in a decidedly bleak period of economic transition. Treasurer Joe Hockey appears to be on board with such thinking, as he pushes project funding to the top of the government's agenda. According to Mr Hockey-
"In a phase in which business investment spending is looking increasingly shaky and support to economic activity is required, a more active public sector role in financing and supporting infrastructure projects should be welcomed."
Deloitte’s investment database indicated a $3.4 billion, or 0.4 per cent, drop in the total value of projects in the September quarter, a considerable 5.7 per cent lower than a year ago. The value of definite projects - under construction or committed - slipped in value by 0.7 per cent to $464.7 billion. Meanwhile, the value of projects in the planning stage was 12 per cent lower than September 2012, at $409 billion.
Resource company headlines
Fortescue Metals Group Limited
(ASX:FMG) is looking to take advantage of favourable credit market conditions to lower the interest repayments on its debt, according to media reports. The iron-ore giant will seek to reduce the interest rate applied to its $US5 billion senior credit facility, that's due to mature in October 2017. The debt facility currently has a total coupon rate of 5.25 per cent. Fortescue says its latest quarterly results, which showed it was shipping more and receiving higher prices for its iron ore, and strong credit market conditions made the move to reprice its debt possible. The company is also looking to extend the maturity term of its loan but says the move will not increase its overall debt position.
Sandfire Resources NL
(ASX:SFR) has inked a joint venture and farm-in with Ventnor Resources Limited
(ASX:VRX). Under the deal Sandfire will pay $3 million upfront for an immediate 35 per cent stake in Ventnor’s Thaduna/Green Dragon Project in Western Australia. Sandfire will also have the option to increase to 80 per cent ownership in two stages through sole funding an extra $6 million on exploration and studies. The Thaduna/Green Dragon Project is positioned 40 kilometers east of Sandfire’s wholly owned DeGrussa Copper Mine. Sandfire Managing Director Karl Simich says the deal represents a low-risk option on a potentially attractive future organic growth project. Ventnor says the deal will fast-track the project to production and remove the need for the company to raise extra funding for mine development.
Whitehaven Coal Limited
(ASX:WHC) has reported a strong lift in coal production after the relocation and start-up of longwall equipment at its Narrabri Mine. In its quarterly production report, the miner’s managed saleable coal production rose 44 per cent to 2.3 million tonnes in the three months to September 30, compared with 1.6 million tonnes in the previous corresponding period. The miner said production set a new quarterly record and attributed the increase to record production rates from the longwall at Narrabri Mine, compared to early stage ramp up of the longwall in the previous corresponding period. Mine coal production was 2.7 million tonnes in the quarter, a 39 per cent increase from 1.9 million tonnes in the previous corresponding period. Whitehaven said its Narrabri Mine's annualised cutting rate for the long wall reached 7.1 million tonnes during the quarter.
Beach Energy Limited
(ASX:BPT) has increased its stake in oil and gas producer Cooper Energy Limited
(ASX:COE). But Beach has told media that it has no current intention to make a takeover offer for the fellow Cooper Basin-based company. The move increased Beach's stake in Cooper from 9.5 per cent to 18.41 per cent. It also has helped Cooper's share price recover from its recent lows of 36c a share in response to inconclusive results from the drilling of the Hammamet West oil prospect offshore Tunisia.
