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Did BHP Billiton call the end of the resources boom?

The debate goes on. Is the resources boom finally over?

Readers of The Weekend Australian Financial Review would have been in no doubt…

“BHP has its finger on the pause button…”

“China’s aggressive push to control inflation means the rate of growth in its economy is slowing and no other emerging economy is expected to follow the same path of rapid growth. Brazil, Russia and India, unlike China, host vast quantities of high-quality resources.”

“Where’s the boom gone?”

“With new commodity supply coming on stream, and attempts to shift Chinese economic growth into a more moderate a less capital-intensive phase, the price of Australia’s coal and and iron ore exports will likely ease further…”

Even the executives of our big miners are admitting things are tough.

BHP Billiton (ASX: BHP) (NYSE: BHP) chief executive Marius Kloppers said last week…

“What is clear is that in a number of commodities we’ve seen prices coming down, particularly in the processing-orientated activities like aluminium, manganese metal, nickel and so on, which, combined with higher costs, is making life difficult for some of those operations.”

If like is difficult for BHP, with its vast portfolio of long-life, low-costs assets, you have to feel for the rest of the mining sector. Perhaps it’s no wonder companies like Fortescue Metals Group (ASX: FMG), Iluka Resources (ASX: ILU) and even Rio Tinto (ASX: RIO) (NYSE: RIO) are amongst the most heavily shorted ASX stocks.

The boom may be over, but a bursting of the bubble is unlikely. Although commodity prices have fallen, they are still trading way above their historic levels.

Mining companies can still generate vast profits, but earnings growth is about to become a whole lot harder. Still, the notion of ‘vast profits’ hardly constitutes the bursting of the resources bubble.

We’ve been saying for some time we’d be interested in buying BHP shares at a bargain price. A little bit of a market correction might see them sneak back down to around $30, a 12 per cent fall from here. At that level, they’d certainly be interesting.

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Bruce Jackson has an interest in BHP. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available.

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