RBA's Philip Lowe in AFR today:
Q: With the surge in revenues from increased commodities prices, are we looking at a mini-resources boom, and is there a risk it could lead to inflation similar to 2006-07?
A: It’s possible that happens, but I think it’s quite unlikely because for that to happen, resource companies would have to decide now to invest heavily on the back of higher prices because that’s what happened in the previous resources boom. China demanded a lot of steel, the price of iron ore and other commodities went up and Australian producers invested a huge amount.
The economy was on the verge of overheating because of all the investment income. But this situation is quite different. It’s unlikely that the resource companies are going to go out and invest a lot at the moment because of the higher commodity prices. They’re not expecting a boom. We’re expecting a lot of this extra national income to be saved this time because resource companies aren’t likely to invest a lot.
________________________
Ash here.
I agree with Lowe. For S32 in particular, steely discipline means no M&A at boom prices. The Sierra Gorda bridging loan will vanish, the balance sheet goes pristine, and we will be back to share buy backs. These are dull but they work.
GK & team know booms don't last forever and the best M&A opportunities come later. See: Vale Nickel. Regardless of whatever happens now, that is the time to have plenty dry powder.
I find it very interesting that S32 share price went vertical, then, after LME metals prices took off the SP has reversed. Lots of metals front-running going on here.
Ash
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$3.53 |
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Mkt cap ! $15.98B |
Open | High | Low | Value | Volume |
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No. | Vol. | Price($) |
---|---|---|
3 | 11737 | $3.52 |
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Price($) | Vol. | No. |
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$3.53 | 37687 | 1 |
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1 | 10000 | 3.520 |
1 | 500 | 3.510 |
7 | 190459 | 3.500 |
6 | 352973 | 3.490 |
9 | 136106 | 3.480 |
Price($) | Vol. | No. |
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3.530 | 37687 | 1 |
3.540 | 112890 | 4 |
3.550 | 114492 | 5 |
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