Bad debt in mining sector expected to increase
The mining sector is looming as the biggest bad-debt threat for banks as commodity prices fall amid concerns about the pace of growth in China.
A survey of senior executives at Australia’s banks found they expected bad debts to worsen among mining and mining services companies over the next year, as the resources sector came under pressure.
Despite the risks, banks are continuing to lend to the resources sector with the ANZ Banking Group offering up to $1 billion in finance to iron ore magnate Gina Rinehart.
According to the survey of chief financial and risk officers at the big four banks and other regional lenders by UBS, the bad debt situation in mining is expected to “deteriorate somewhat” in the next 12 months.
Mining sentiment in free fall
An influential report has warned that confidence in the mining sector is in “free fall”, with top executives displaying a gloomy outlook and slashing capital expenditure, according to The Australian.
The 2013 Mining Business Outlook report by Newport Consulting has revealed a sharp negative shift in sentiment among industry leaders over the past year. It is also the first time in the report's four-year history that miners have declared they are reducing capital expenditure – not just postponing or moderately increasing it.
Expansion of Rio’s Oyu Tolgoi copper mine delayed
In what could be a blow to coal hopefuls in Mongolia, Rio Tinto has been forced to halt all funding and underground expansion work at its $US6.2 ($A6.7) billion Oyu Tolgoi copper mine after the local government notified the global resources house that required financing earmarked for the development needs additional approval from the country’s parliament, according to the Australian Financial Review.
Oyu Tolgoi finally began shipping copper concentrate from the site on July 9 after two major delays as a result of negotiations with the Mongolian government about how the proceeds from the mine would be banked.
The unanticipated extra approval requirements come as the Mongolian Parliament is in summer recess.
