Australia’s major iron ore producers have continued to lift output while China’s growth rate has slowed less than expected.
Markets this week were focused on production reports from the major miners. Rio Tinto Limited
(ASX:RIO) and BHP Billiton Limited
(ASX:BHP) both announced March quarter iron ore production figures that exceeded analysts expectations. OZ Minerals Limited
(ASX:OZL) reported a dip in first quarter copper output but a rise in gold production.
China has announced its growth figures for the March quarter with its GDP rate growing 7.4 per cent, forecasts had the rate slightly lower at 7.3 per cent.
Commentary
Finance News network spoke with Tim Shroeders, the Pengana Global Resources Fund Portfolio Manager. Mr Shroeders gave FNN a valuable insight into the challenges that have faced the major resources companies as demand for resources stocks has cooled.
" I was surprised and I think most people who specialise in the space have been surprised, given the sustained nature of it. And really what we’ve seen is an order of magnitude shift, whereby a lot of the blue sky elements have been priced out. And companies, quite frankly, have been punished for bad investment decisions during the good times and not spending capital judiciously.”
As coal and iron ore prices rise, in spite of forecast dips in Chinese demand, there is optimism in the oil and gas sector.
“Oil and gas is a great business to be in I think. The price overall is probably less volatile than a lot of other commodities. And what we’re seeing, in the US in particular is a shale phenomenon, where we’re seeing new technologies being deployed and companies doing it quite successfully, in limited regions.”
“But what we’re seeing is the cost curve shifting. The dynamics in terms of deploying capital and getting quick payback are highly advantageous irrespective of the commodity, which makes that attractive to us. But overall, oil and gas, it’s a high margin business. The price of the underlying commodities is less volatile than others we’re seeing and returns on capital are still very favorable, compared to other sectors.”
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Miners report March quarter output result
Rio Tinto Limited
(ASX:RIO) has affirmed its annual output guidance after reporting a lift in iron ore production in the first three months of 2014. The mining giant lifted its global iron ore production by 8 per cent to a first quarter record of 66.4 million tonnes. Over the full year Rio Tinto has affirmed it expects to produce about 295 million tonnes from its global operations across Australia and Canada.
BHP Billiton Limited
(ASX:BHP) has bumped up its annual iron ore production guidance after reporting a record result over the nine months to the end of March. Australia’s biggest miner produced 49.6 million tonnes of iron ore in the third quarter, rising 23 per cent from the year before and beating analyst expectations. The company now expects iron ore output from its global operations to increase by 5 million tonnes to 217 million tonnes over the full year to the end of June.
OZ Minerals Limited
(ASX:OZL) has reported a dip in first quarter copper output but a rise in gold production. March quarter copper output came in at 18,182 tonnes, down from 20,474 tonnes the year before but ahead of expectations for 15,400 tonnes. March quarter gold output came in at 33,792 ounces, up from 31,790 ounces the year before.
Liquefied natural gas projects advance
Liquefied Natural Gas Limited
(ASX:LNG) has inked a Technical Services Agreement with a wholly owned subsidiary of Korea’s SK Engineering and Construction Co. Ltd (SKEC Group). The liquefied natural gas developer says the agreement is for the ongoing engineering, procurement and construction of its planned Magnolia LNG Project in the US.
Horizon Oil Limited's
(ASX:HZN) Stanley gas condensate development project has scored the green light from the government of Papua New Guinea. The petroleum developer says the government has authorised a petroleum development licence and pipeline licence for the project.
