The resources sector is in transition, miners have been forced to show conservatism and judicious investing to stay in the green.
Commentary
Finance News Network spoke with UBS Investment Bank Chief Economist Australasia, Scott Haslem. Mr Haslem shared his optimism for the mining sector and explained China’s slowing demand for resources.
“We have a moderate view on China in the sense that we think it is slowing but not tremendously, so growth around 7 to 7.5 (per cent) over the coming couple of years.”
“Within that, we also think that China is becoming less commodity intensive. So, that is going to have some downward pressure on commodity prices relative to where they have been over the last few years.”
“But, despite that we think valuations are very attractive in mining. Our strategists think the market will eventually start to value the free cash flow that you are going to see from the mining companies as they return capital to investors and maintain a fairly subdued CAPEX outlook.”
Commodity movements
Iron ore prices are making steady gains towards $US120 a tonne this month despite suggestions a surplus of supply will constrain prices as Chinese growth slows.
Gold has reversed losses after the US Federal Reserve suggests interest rates won’t rise anytime soon.
Major miners making headlines
BHP Billiton Limited
(ASX:BHP), Rio Tinto Limited
(ASX:RIO) and Fortescue Metals Group Limited
(ASX:FMG) are behind a bounce in shipments from Port Hedland last month. All the major miners use Port Hedland, which is Australia’s largest port in the Pilbara region of Western Australia, which saw iron ore exports to China jumped to a record 27 million metric tonnes in March.
Energy Resources of Australia Limited
(ASX:ERA) has signalled its plans to restart its Ranger uranium processing plant after leakages were found in a uranium storage tank. The restart remains subject to regulatory approvals but the ERA board has approved the scope of work in the restart readiness plan, recommended by independent experts.
Rio Tinto Limited (ASX:RIO, LON:RIO) will exit one of the world’s biggest copper deposits by gifting its minority interest in Canadian company Northern Dynasty to two local Alaskan charities. Northern Dynasty is the developer of the Alaskan Pebble copper and gold project which has faced pressure from environmental groups concerning its impact to salmon fisheries.
Executive appointments
Flinders Mines Limited
(ASX:FMS) has announced the appointment of Ian Gordon as the Company’s new Managing Director. Commencing in the second half of June 2014, Mr. Gordon’s appointment comes as the company moves towards mining at its Pilbara iron ore project, in Western Australia.
Oil & gas sector
Dart Energy Limited
(ASX:DTE) has exited its remaining business activities in China after completing the sale of its interests in a shale gas project. The coal seam and shale gas explorer sold the interest to Hong Kong Prosperous Clean Energy Limited. The company will now focus on its coal seam and shale gas acreage in the UK.
Santos Limited
(ASX:STO) and Drillsearch Energy Limited
(ASX:DLS) have completed a number of well developments in the Toobunyah and Tintaburra oil fields. Santos and Drillsearch share a 60 per cent - 40 per cent respective split, of the Toobunyah 10 and 11 oil wells which have been cased and suspended.
Drillsearch Energy Limited
(ASX:DLS) has affirmed its full year forecast after exceeding its annual output guidance at the beginning of the current financial year. The oil and gas producer is expecting record production of between 3 to 3.3 million barrels of oil equivalent in the 2014 financial year.
Oil and gas producer AWE Limited
(ASX:AWE) has been awarded a new six year exploration permit offshore Western Australia. The company will hold 100 per cent equity in WA-497-P which is located in the Exmouth Sub-basin of the North Carnarvon Basin.
