Saturday, 28 March 2009

Australian Broker Sees Light at the End of the Tunnel

In his 2009 conference market update at Australia’s RIU Explorers Conference, Patersons Securities Ltd’s head of research Mark Simpson painted a picture where things could well get a little worse before turning around for the better.

There was a perception, he told delegates, that the world had slipped into depression as opposed to just a recession, with the most telling factor perhaps being the number of jobs lost in the mining industry. In January alone, the sector collectively shed at least 4,440 Australian employees, with the biggest individual culprit being BHP Billiton Ltd, which laid off some 3,100 workers at operations in Western Australia (namely the Ravensthorpe nickel laterite disaster, which claimed 1,800 victims), Queensland (coal — 1,100) and South Australia (the Olympic Dam operation — 200).

This was followed by Rio Tinto Ltd (which cut 616 jobs), the publicly-listed Xstrata (379) and OZ Minerals Ltd (205). Then there was the fact that just about every economic commentary going forward predicted negative growth, with “horrendous” figures coming out of Japan, Germany “on its knees” and all the other major economies effectively heading into recession.

“The IMF’s latest numbers say that the advanced economies of the world essentially will grow at a negative 2% this year, and then a marginal recovery into next year,” Simpson observed. “And what we are seeing is that this economic view; focusing on this year, is turning into headlines about depression. How can you be optimistic when every paper you open, every TV station you turn to, is telling you that it can only get worse?”

“Well, essentially, I think that we are in uncharted territory — we are in a period when unprecedented monetary and fiscal stimuli are being pumped at the problem.”

The full article is in Gold & Minerals Gazette, March 2009 (p.27)

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