Replies to post #27196 on Abet Chichi2 (Chichi2)

[EZ2]

I have taken the lock off of our "nuclear fallout bunker" !!!

:-)

[EZ2]

bob3 ~~~ shouldn't all this BAD news and rate cuts
and ongoing dollar shrinkage be a POSITIVE for gold,
PM's and miners ??? Why is this not playing out ?????

Miners under pressure
Tuesday January 22, 8:40 am ET

Mining folk have always known joy and despair. But the golden run in resources has lasted so long that many must have forgotten what a rough patch feels like. The world mining index rose another 75 per cent in 2007. This year, however, the sector has started with a tumble, falling by almost a fifth. Not even the frenzy of potential mega-deals has provided support. BHP Billiton (NYSE:BHP) and Rio Tinto are down over 20 per cent. Even Xstrata, as in-play as it is possible to be, and this week revealed to be in talks with Brazil's Vale, is down 12 per cent. The speculative end of the industry has fared even worse.

Is the sell-off over done? After all, the quality resource stocks are no struggling banks (which anyway have not fallen as much). Miners' earnings forecasts could fall, but many companies - such as Rio last week - are reporting record production numbers. Balance sheets are fine: industry-wide net debt to earnings before interest, tax and depreciation is well under one times. Valuations have also taken a beating. Like investment banks, global mining companies always moan about their lowly ratings. Perhaps now they have a point: apart from the odd gold stock, the world's biggest resource stocks are all trading below 10 times forward earnings.

Miners will argue that the trends underpinning their industry have not changed in a matter of weeks. Certainly on urbanisation measures such as steel consumption relative to income per capita, demand from developing economies such as China and India has a long way to rise. Even now there is no doubt that the "stronger for longer" view is still partly built into share prices. That faith is now being tested. The harsh truth is that much of the profit surge in the sector over the last five years has been due to higher commodity prices, rather than volume growth. There are some fundamental and relative arguments for mining tocks, but they would not weather a prolonged slump in commodities well.