Mining stocks have taken a beating from investors’ expectations over the past year, weighing in on billionaires and everyday investors all the same, but is it actually over?
According to the Bureau of Resources and Energy Economics (BREE), more than $140 billion worth of projects have been delayed or cancelled in the past 12 months. Investment bank Citigroup (NYSE: C) has also said 2013 would mark the end of the “commodities supercycle”.
In its latest semiannual report on major projects, BREE announced 18 big developments that were listed, were valued conservatively and the $140 billion is a modest estimate of the combined total. Contributing a massive amount to the overall figure was Woodside Petroleum’s (ASX: WPL) Browse LNG project, which was valued at $36 billion in deferred spending. However, some have said the cost was closer to $80 billion before Woodside agreed to pull the plug.
The reduced investment accounted for approximately 11% of the country’s overall $268 billion spent on resources projects this year. By 2017, the amount of investment is tipped to be back at similar levels to where it was in 2007. High risk exploration spending in the December quarter was $264 million, a 16% decline from the preceding quarter, but it is likely to have fallen a lot further since new bosses at BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) decided to cut spending.
Citi analysts say that, “This year should provide full affirmation that the commodity supercycle has finally ended and should usher in the first ‘normal’ year in over a decade in which, broadly, commodity prices end the year lower than when the year started”.
This year the mining boom may certainly be declared over. However, now more than ever we should be looking for bargains in the industry. Companies that we know will still be around in years to come. No doubt, mining services stocks will be dealt a big blow but it would be a shame to miss out on some quality companies that rise from the industry come 2014.
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