Unless you've been living on a tropical island with no internet connection (if so, can I come visit?), you'd know Australia's mining boom is slowing down… and fast!
As a result of China's waning demand for commodities like iron ore and coal, spot prices will go lower from here. Make no mistake.
Mining investment will also continue to fall, for some time. And it's not going to be pretty.
Pure play iron ore miners like Fortescue Metals Group Limited (ASX: FMG), Atlas Iron Limited (ASX: AGO) and Arrium Ltd (ASX: ARI) are in the firing line. Their share prices have already been hit hard but are likely to keep falling if the commodity prices continue on their current trajectory.
However Australia's two biggest resources companies, BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) mightn't be a sure thing either.
BHP has already felt some of the pain caused by falling oil and iron ore prices. It recently posted a 47% decline in half-year profits. Whilst Rio Tinto reported a 30% decline to its underlying earnings.
No doubt both miners/producers have excellent cost advantages over their peers but a race to the bottom in iron ore, coupled with weaker copper and oil prices doesn't bode well for medium-term earnings growth.
Further, whilst their track records for increasing dividends may be excellent over the past 5, 10 or 15 years; we must remind ourselves that in the past decade our miners have experienced an unprecedented China-fuelled mining boom, which we know won't go on forever.
Is it time to sell your Rio and BHP shares?
Of course, it's not all doom and gloom and BHP and Rio are likely to go on producing decent returns for shareholders over the coming years. However with major commodity prices falling with no end in sight, from today's prices I do not believe shares in either company will go on to produce market-beating returns for investors.
