A Review On The Resources Sector

Submitted by Jim Thesiger on 8 May, 2008 - 14:43

Here is a review on the sector resources provided by Australian stockmarket analyst Macquarie Research Equities.

How High can Resources Go? A Review of the Sector

Yesterday Macquarie hosted the Metals and Mining stream of its annual Australian Conference, where key companies are reviewed and presentations made by their CEO’s. The underlying theme to arise from the conference is that there is sustained strength in the current commodity price cycle, with continuing demand growth in China being driven higher by supply side challenges. Macquarie Research Equities (MRE) has reviewed the key minerals that make up this sector and feel there are bountiful opportunities available for investors and traders alike. To find out the key picks click here:

Running through the major drivers, coal stands out with improving prices over both the short and medium terms, being led by Centennial Coal (CEY). Base metals also appear rosy with continued tight inventories and supply side risk. Of note, is those predominantly in construction, such as aluminium, copper, zinc and nickel. India and China’s rapid speed of development continues to drive prices in these. Zinifex (ZFX) and Oxiana (OXR) are expected to capitalise on this market potential and MRE continues to rate both an outperform. Gold also looks set to continue its rise back to previous highs above the US$1,000/oz mark. Although volatile, the precious metal continues to track upwards with Sino Gold (SGX) outperforming competitors.

Iron Ore is the one metal that MRE is not increasing its outlook for 2009. This can be attributed to the overall market expected to be slightly softer, despite the growth potential in China / India. Regardless of this, spot prices are currently trading at huge premiums to contracts and as a result there is significant room for contraction, with companies still maintaining their growth. With companies still expected to outperform in this environment MRE believes Mount Gibson (MGX) will be the most notable stock.

Overall the resources sector is expected to continue the drive of the Australian economy, with 2009 looking to be another high performing year. Although there are many factors that may influence this picture, it is essentially the strong growth coming from the emerging markets that will maintain this view.