Mining Boom not dead say CEOs

Plenty of life left yet say corporate bosses

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published September 5, 2013 12:07 pm AEST

Apparently there's plenty of life left in the mining boom, according to some of Australia's leading corporate CEOs.

Corporate leaders have questioned Kevin Rudd's claim that the mining boom is over, saying the economy is set to benefit from the income phase of the boom as higher production of iron ore and liquefied natural gas (LNG) starts to flow through the economy in the next couple of years.

Origin Energy's (ASX:ORG) Grant King has told The Australian, "It's not over; most of the capital still has to be spent in order to deliver these big projects". He added, "In respect to the LNG industry, there's still at least half to be spent across the industry . . . and when it's spent it's turned into revenue and that's still to come, so the revenue hasn't even started."

Origin is involved in the Australia Pacific LNG project being developed in Gladstone alongside partners ConocoPhillips and Sinopec, and due to begin production in 2015. In early August, Origin said the project was 45% complete, and still has some way to go.

Woodside Petroelum's (ASX:WPL) chief executive, Peter Coleman has also told The Australian, "I think people are taking a pause, I wouldn't say it's over." Mr Coleman says there had been a moderating of investment in resources, after a rush to take advantage of high commodity prices.

Arrium (ASX:ARI) (ex-OneSteel) boss Andrew Roberts said the company, which makes steel products and mines iron ore, was continuing to see strong demand, particularly in the Americas. "It might be that the peak has passed us for a little while but there's also more capital investment in Australia going forward," Mr Roberts said.

But mining contractors are suffering from the fallout of cuts to capital expenditure and exploration from big resources companies such as Rio Tinto (ASX:RIO) and BHP Billiton (ASX:BHP). Mining equipment utilisation rates at some companies has dropped from above 70% to low single digits.

Foolish takeaway

Commodity prices were expected to fall away substantially and haven't, while China continues to import record amounts of iron ore each month. That suggests at least some parts of the resources sector are still going strong, and that Mr Rudd's view that the mining boom is over is likely wrong.

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Motley Fool writer/analyst Mike King owns shares in BHP and Woodside.

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