AUSTRALIA'S junior and mid-tier mining sector is reviewing operations and investigating cutbacks to ride out the global financial turmoil, as commodities plunge to record lows.
A list of miners posted updates to the market yesterday, blaming the credit climate for the reviews, but iron ore miner Mount Gibson appeared to be hurting most, requesting an extension of a suspension of its shares, with no indication of when it expects that to be lifted.
Mount Gibson is still struggling to completing an off-take agreement for its iron ore after recently announcing to the market its Chinese customers had requested a slowdown in shipments.
Herald Resources is confident in its flagship project but is investigating selling a stake in the Dairi zinc/lead operation in northern Sumatra, in which it has an 80 per cent interest. The Perth-based miner said it had begun seeking expressions of interest for the potential sale of up to a 29 per cent holding in the project.
Acting chief executive Evan Ball said the company was looking to raise equity for the project and, while it was also pursuing other avenues, some options had "dried up". Mr Ball said: "There has always been some interest in the project but it has waned a little in the current climate."
Mr Ball said Chinese and Indonesian consortium Antam-Zhongjin, which lost out to PT Bumi Resources in its bid to takeover Herald, was still interested in the company. BGF Equities analyst Warwick Grigor said the plunging prices provided "buy" opportunities for those with cash.
"It's a smorgasbord opportunity if you have got cash," he said. "The tragedy will be if some of these companies sit on this cash all the way through this cycle and come out the other end with the cash, having not purchased something of significant value."
Cleveland Cliffs plans to use resources stocks being hammered to its advantage, announcing plans yesterday to make on-market purchases of shares in Portman at prices below those offered in its $21.50-a-share takeover bid.
The dramatic drop in resources stocks has been on the back of base metals prices continuing their fall south.
Commonwealth Bank commodities strategist David Moore said base metals prices were still falling because of the concerns over a weakened economic outlook. "It's impossible to say when prices will bottom but it's expected base metals prices will remain fairly volatile over the coming period," Mr Moore said.
Industrial metal copper plunged to its lowest level since September 2005 at the end of last week, closing at $US3665 a tonne. Nickel closed up $US650 at $US10,000.
Nickel miner Minara Resources said yesterday it was continuing to explore additional ways to reduce costs and that these measures would be implemented during the quarter.
