In the right-here-and-now, all eyes are on the Rio Tinto/BHP Billiton drama. We turned to our resource analyst Al Robinson at Diggers and Drillers and told him to give us today’s developments in 50 words or less. It was more than 50, but the extra 65 words are worth it.
“Rio announced 3 billion tonnes of new iron ore resources yesterday. It was also the same day the company agreed to talk with BHP about the deal...this is not a coincidence. Those 3 billion tonnes will come in handy at the negotiating table,” he replied. This comes just a day after Rio announced it had “discovered” a billion tons of thermal coal in South Africa (which happens to desperately need the stuff.
Rio should be pursued by BHP more often. It seems to bring out the best in Rio’s exploration results. And just in time too.
The price increases from thermal coal and iron ore are set to deliver an extra $30 billion to Aussie miners, according to David Uren in the Australian earlier this week. The miners are on track to rack up $70 billion in exports next year on the back of 50-50% increase in ore prices and a huge spike in thermal coal prices, where Australia happens to supply 25% of global demand.
Al continues, “The deal is alive again, and Rio are interested...probably at a higher price, but interested nonetheless. It's game on. Look for these two to get closer together on a deal—barring a Chinese counter move—and start dragging the resource sector up again.”
Dan Denning
The Daily Reckoning Australia
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About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 and has covered financial markets form Baltimore, Paris, London and, beginning in 2005 Melbourne. He’s the editor of The Daily Reckoning Australia and the Publisher of Port Phillip Publishing.
