Hi Chakay, Colin off to China later this Month, yes intersting...

Hi Chakay, Colin off to China later this Month, yes intersting times ahead... IMO as they say "need to may hay while the sun shines".

Mining boom set to continue, says report
8th June 2009, 11:45 WST

WA will emerge from the global economic crisis quickly driven by the developing world’s continued and insatiable demand for the State’s raw materials, a report by accounting and consulting firm PricewaterhouseCoopers says.

The report “Mine: When the going gets tough…” says despite earnings pressures, falling market capitalisation, impairments and plunging commodity prices, revenue among the world’s top 40 mining companies rose by 23 per cent from US$266 billion in 2007 to US$349 billion in 2008 – a record high.

Earlier this month, Rio Tinto locked in contract prices for its ore with Japanese and South Korean steelmakers that were about 37 per cent below last year’s peak, but industry analysts have noted that while the price reduction is steep, it is still the second highest ever negotiated.

PWC’s head of global mining Tim Goldsmith said the global financial crisis had masked the ongoing commodities super cycle, but the mining boom had never really stopped.

The Melbourne-based analyst’s outlook for commodities corresponds with the “stronger for longer” philosophy espoused by former Rio Tinto boss Chip Goodyear.

“There’s a super cycle which started 30 years ago as developing countries started to industrialise and it has another 150 years to go,” Mr Goldsmith said.

“When we had the failure of Lehman Brothers, the takeover of Merrill Lynch by Bank of America and the rescue of insurer AIG, the global financial crisis took control of the world’s economy.

“The commodity market was hit, like everything else.

“Those with a debt position had an added challenge because (as a company) having debt was not where you wanted to be at that time.

“But now the fundamentals of the super cycle are getting the upper hand and winning the battle over the GFC.”

Mr Goldsmith said finding finance was still difficult because banks were still reluctant to lend money but resource companies were finding, and would continue to find, more innovative ways to raise finance for their projects.

“There’s definitely been a slowdown and resource companies have had to look hard at their costs, but over the long term, demand for commodities will continue to be massive,” he said.

“As the resources industry enters a challenging stage, the Top 40 must not lose sight of the long-term end game - supplying resources to half the world’s inhabitants.”

Perth-based independent analyst Peter Strachan said he broadly agreed with the notion of a super cycle but was more bearish about commodities, particularly in the short term.

“The global economic crisis is a blip, but it’s a pretty significant blip,” he said.

“I think we’re in for a sloppy couple of years.

“Commodity prices tend to rise and fall in three-to-four-year cycles and 2007 was the last peak.

“I think we will continue to see supply surpluses and low demand.

“Industrial production is pretty miserable and I don’t see it coming back until late 2010.”

In the longer term, demand for commodities from emerging economies such as China, India and Vietnam would continue to drive prices along with the cost pressures of finding and extracting commodities which were becoming more scarce.

“In the past, commodity prices have tended to fall because improving technology and smarter mining techniques have made it easier to find and extract them, but now costs are starting to rise because commodities are becoming scarcer and companies are forced to mine lower grades of ore,” Mr Strachan said.

“The costs of transporting ore are also rising because of the rising price of oil.”

Mr Strachan said he saw further consolidation in the resources industry with China “moving upstream” along the production line by investing in miners to secure supplies of commodities.