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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (37523)	5/22/2009 8:01:18 PM
From: LoneClone	Read Replies (1) \| Respond to of 194794

Mining projects a casualty of tightening cred I-Net Bridge \| Thu, 21 May 2009 18:12 miningmx.com [miningmx.com] -- Large-scale mining projects will suffer from the tightening of borrowing because of the global financial crisis, BHP Billiton chairman Don Argus said on Thursday. Speaking at a business luncheon in Australia, Argus said the international banks on which many large-scale projects rely upon are decreasing their foreign exposures. A typical project finance bank would normally lend up to A$500m (R3.3bn) but in the current environment they would limit this to less than A$100m (R652m). Domestic banks are unlikely to increase their exposure to large-scale, long-term projects, even though they are likely to be one of the few growing sources of credit supply, Argus said. In fact the three major sources for large-scale, long-term investments – domestic banks, foreign banks and debt markets – are all disproportionately affecting large-scale, long-term investments in resource rich countries. "If you are a leader or senior manager in the corporate world it is not hard to stand up and predict a tough 2009 and 2010. You don't need a highly sophisticated planning model to lead you to that conclusion," said Argus, explaining that companies around the world scaling back on capital expenditure, cutting back employee numbers and reducing inventories. Manufacturing plants are being mothballed, mining projects deferred or shut down and most industries are reviewing their strategies and the suitability of their future operating models. The global economy and the economies of leading nations such as the US and China are being closely scrutinised and report released by the International Monetary Fund (IMF) four weeks ago highlights the fact that the global economy is in severe recession. Also providing a sobering analysis – based on hard data – of the state of the world's financial system, the IMF concluded that global activity is expected to decline by 1.3% in 2009 before rising moderately during the course of 2010. The IMF expects write-downs in the global exposures of the financial services sector to be US$4 trillion. "Shareholders of overseas banks and other financial institutions have lost a massive amount of their investment and that is unlikely to be returned in the short term. The balance sheets of many banks must shrink and be repaired. That means a reduction in credit," said Argus. Their caveat in the report was that any turnaround depends on government authorities acting decisively to restore financial stability. Fiscal and monetary policies in the world's major economies will also need to provide sustained strong support to arrest negative demand. What no one can predict with any confidence is the depth and duration of the global recession and the accompanying financial crisis. "Today's business environment is one where you have an uncertain economic outlook – rising capital costs, falling asset prices, rising unemployment – and the impact of fiscal and monetary policies difficult to gauge," said Argus, who is pessimistic about the prospects for a short-term recovery. He pointed out that the IMF report and others make it easy to conclude that the road to economic recovery will be slow. "We can hope for a recovery in 2010. Yet I believe we should also have contingency plans for a scenario where the world capital markets continue to provide surprises on the downside," he said.