News Wrap

IN THIS morning’s News Wrap: Rio, BHP profits expected to fall sharply; sigh of relief as uncertainty ends; and state won’t help to get miners out of a hole.

Staff Reporter

Rio, BHP profits expected to fall sharply

More evidence that the mining boom has run out of puff is on its way, as Rio Tinto and BHP Billiton set about reporting sharply lower profit results, along with a new zeal for cost-cutting and capital discipline in response to weaker commodity prices and concerns about global economic growth, according to The Australian.

Massive profits from iron ore will be a feature of the earnings reports. But the resource's price strength is also seen by most in equity markets as the Achilles heel of the two biggest diversified miners, given the broad expectations that strong supply growth will eventually undercut prices.

Sigh of relief as uncertainty ends

Business leaders have welcomed the announcement of the September 7 federal election, saying it will remove some of the uncertainty – the so-called Canberra discount – that has plagued consumer and business confidence in the past few years, according to The Australian.

“We are paid to make forward-looking decisions,” Harry Boon, chairman of Tatts Group and a director of Toll Holdings, said.

State won’t help to get miners out of a hole

West Australian Premier Colin Barnett has ruled out giving royalty relief to gold and nickel miners who have been pummelled by the sharp fall in commodity prices, according to the Australian Financial Review.

Barnett said everyone who worked in the state’s mining sector was aware it is a cyclical industry. He argued it would be a mistake to make royalty changes based on price fluctuations.

“I know this is a tough time and some of the high-cost producers struggle. [But] at the end of the day the state government owns the minerals and companies pay the equivalent of 10%per cent of the value of the mineral. I think that’s a pretty good price,” he said.

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