8:30 PM Sydney – Australian indexes halted a 5-week long rally after the debate about the durability of the mining boom intensified. RBA governor Stevens said mining companies have enough capital and it is too soon to declare the end of the boom. Iron ore prices fell below $100 level for the first time since 2009.
The one-decade long debate about the mining boom took a new dimension after the iron ore prices declined below $100 level for the first time in three years and the Reserve Bank Governor Glenn Stevens weighed in with his comments.
The spot price of the iron ore declined to $99.60 a ton and fell below $100 level for the first time since 2009. The steady decline of the last seven weeks has knocked off more than 30% in the price and more falls are likely to come.
The RBA chief Stevens said today that it may be too soon to declare the end of the mining sector boom and said that mining companies have enough capital to keep increasing capital spending.
Stevens held the earlier estimate by the central bank of $145 billion in spending by the mining companies, an all time record and reaching as much as 9% of gross domestic product.
He also said that the industry will be better served if several projects do not come to a realization because that will relive the cost pressures and also said many projects in the pipeline are viable under the current global economic scenario and local cost structure.
The ASX 200 index slipped 34.70 to 4,349 and the broader All Ordinaries decreased 35.33 to 4,376.50. For the week, the ASX index decreased 0.2%.
The Australian dollar decreased to US$1.040 from US$1.051 on the growing realization that the mining boom may be waning at least in the near term.
In trading, stock turnover fell to 1.64 billion shares below last week’s average and shares worth $3.92 billion exchanged hands. Of the shares traded, 390 increased, 525 declined and 340 were unchanged.
Woolworths Net Falls
Woolworths said its annual earnings declined 14.5% to $1.82 billion, its first earnings fall in 13 years after the retailer was forced to write down $420 million in electronics retailer Dick Smith.
Revenues in the fiscal year increased 4.7% to $57.06 billion and excluding losses linked to Dick Smith chain, net income increased 3.6% to $2.18 billion.
Woolworths declared final dividend of 67 cents a share payable on October 12 with a total of $1.26 for the year.
The retailing giant said it plans to spend $1.3 billion in capital expenditure in the current year. Of the total, $813 million of spending will be focused on retailing linked to food, packaged groceries and liquor.
BHP Billiton Limited slumped 32 cents to $33.09 and, Rio Tinto Limited plummeted $2.38 or 4.4% to $51.80 and Fortescue Metals Group declined 26 cents to $3.98.
Iluka Resources slipped 32 cents $9.60 and Lynas Corporation Limited closed unchanged at 66 cents.
Newcrest Mining climbed 26 cents to $26.20 and Kingsgate decreased 10 cents to $5.07.
Whitehaven Coal plunged 39 cents or 11.2% to $3.09 after Nathan Tinkler dropped his $5.2 billion takeover offer. Separately, the company said annual net profit increased to $62.5 million.
The engineering contractor, Monadelphous Group increased 15 cents to $21.98.
Oil Search Limited closed unchanged at $7.33 and Santos Limited slipped 14 cents to $11.58 and Woodside Petroleum added 3 cents to $35.30. Sundance Energy surged 21 cents to 77 cents.