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Mining languishing in the doldrums

THE mining industry is in a vicious cycle with little light at the end of the tunnel.

This is the general consensus of opinion among leading mining companies and economic analysts.

According to the Challenge Bank Market Insights economic report for the March quarter, the national figures for mining in WA indicate an industry in difficulty.

Output from the mining sector contracted in the second half of 1998 and output in the fourth quarter was down 8.5 per cent on the previous year.

Despite this, mining export volumes grew 4.1 per cent during the same quarter a year ago.

However, lower prices were the real problem for the miners, pushing down mining profits by 10.5 per cent.

“With the Australian dollar providing less support, 1999 is set to be another tough year and, in response, the mining sector has sharply cut back capital spending plans,” the Challenge Bank analyst said.

An Australian Bureau of Statistics survey shows a probable 20 per cent cut in 1998-99 and, on top of that, another 10 per cent cut in 1999-2000.

This was reiterated by North Limited CEO Malcolm Broomhead, who said the Australian mining industry was in a cycle, “albeit a vicious one”.

In terms of minerals demand, he pointed out to delegates at the Minerals and Energy Overview session at Outlook ’99 that the current downturn was not as severe as those prompted by the oil shocks and the collapse of the Soviet Union.

“However, a range of extra costs, including environmental costs and those related to land tenure point to a period of shakeout in the industry,” he said.

Mr Broomhead reminded delegates that companies which adapted best, and changed, would emerge as winners when prices recovered.

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