With talk of the mining investment boom having peaked it appears the next wave of the mining cycle is gaining momentum. Resource sector production reports from 2013 have been rolling in and the results have been well-received with many exceeding expectations. However, as Australian mining production booms China’s latest growth figures have dropped to the lowest level since 1999. The report has stoked concerns Australia biggest customer is set to experience softer demand for our commodities.
China’s growth hits 14-year low
China's latest economic growth figures have beaten market expectations and the government’s 7.5 per cent growth target, despite falling to a 14 year low at the end of last year. China’s National Bureau of Statistics reports the economy grew at an annual pace of 7.7 per cent in the December quarter from an annual pace of 7.8 per cent in the prior quarter. Over the December quarter the economy grew 1.8 per cent, down from 2.2 per cent in the September quarter.
World Bank boosts growth forecasts
The World Bank has boosted its global growth forecast but cautioned of volatility in capital flows as America begins to tighten its monetary policy. The bank’s Global Economic Prospects report predicts global gross domestic product will grow 3.2 per cent in 2014 - from its last prediction of 3 per cent made in mid 2013 - and from an annual growth rate of 2.4 per cent over 2013. The World Bank says for the first time in five years there are indications a self-sustaining recovery has begun among high-income countries, which suggests they may now join developing countries as a second engine of growth in the global economy.
Commentary
Commonwealth Bank of Australia
(ASX:CBA) Chief Economist, Michael Blythe speaks to FNN about the next wave of the mining cycle:
“So we’ve had the income boom based on high commodity prices, that’s over. The mining CAPEX, or mining construction boom, is peaking right now and that will become a drag on the economy. But of course hopefully all that mining construction, all those LNG (Liquefied Natural Gas) plants we’ve been building, are going to drive a pretty significant increase in production and export from here. So we’re moving on to the next wave. It will be a different sort of mining story if you like. But that resources component will be making a pretty significant contribution to the economy still.”
Production reports
Rio Tinto Limited
(ASX:RIO) has beaten its annual cost-cutting targets and production forecasts for copper and iron ore output over the 2013 calendar year. The global miner also achieved record iron ore, bauxite and thermal coal output last year.
Newcrest Mining Limited
(ASX:NCM) has boosted its gold and copper production in the December quarter. Australia's largest listed gold miner has also predicted annual gold production will reach the higher end of its forecast range.
Iluka Resources Limited
(ASX:ILU) has reported lower production but higher sales volumes in its December quarter production report. The mineral sands miner says its revenue was impacted by lower prices for its products.
OZ Minerals Limited
(ASX:OZL) soared to the best performer of the day after its December quarter production report surprised the market. The mining company hit its gold and copper output guidance and revealed its cash position fell less than expected last year.
Silver Lake Resources Limited
(ASX:SLR) has reported record quarterly production for the last three months of 2013. The gold miner has also boosted its gold guidance and reduced its debt from $20 million to $8 million.
Sandfire Resources NL’s
(ASX:SFR) quarterly report has revealed a fall in copper and gold output over the December quarter from the prior quarter but the miner has maintained its annual production guidance range.
Wesfarmers Limited
(ASX:WES) has boosted its coal production in the December quarter on the back of an improved plant performance. The conglomerate has also inked a $70 million deal to buy a mineral development licence near its Curragh mining lease from Peabody Energy.
Financing deals
Paladin Energy Limited
(ASX:PDN) has had a busy week releasing its quarterly activities report, refinancing its key projects and selling a minority interest in Langer Heinrich Mine. The uranium miner reached agreements with its lenders to refinance its Langer Heinrich and Kayelekera project finance facilities, reported record December quarter production for both mines and inked a $US190 million deal to sell a 25 per cent joint-venture equity stake in its Langer Heinrich Mine to a Chinese nuclear utility.
Iron ore miner Fortescue Metals Group Limited
(ASX:FMG) says its plans to repay $US1.6 billion of debt will see gross debt drop to $US9.6 billion by the end of March 2014. The company also this week inked a long-term gas pipeline deal aimed at cutting costs at its mining operations in the Pilbara region of Western Australia. Infrastructure provider Duet Group
(ASX:DUE) will build, own and operate the pipeline. Fortescue has awarded mining services provider Monadelphous Group Limited
(ASX:MND) a $100 million contract to help construct the gas pipeline.
