Investors Worry as Miners Cut Spending – by Rhiannon Hoyle (Wall Street Journal – September 13, 2015)

BHP, Rio Tinto have tightened their belts in response to commodities slump

SYDNEY—For some years, the big question for the struggling mining industry has been how to shave costs and be more efficient.

But while the biggest companies remain preoccupied with belt tightening—mainly in response to the sharp retreat in world commodity prices—their impatient shareholders are asking a different question: What’s next?

With the bulk of the cutbacks completed, investors are putting increasing pressure on BHP Billiton Ltd., Rio Tinto PLC and others to begin looking beyond the downturn, and to focus more on eking out new sources of growth.

“The last thing you want to see is an air bubble in the development pipeline and then, when there’s a recovery, they’re not around to benefit from it,” said Ric Ronge, a Melbourne-based asset manager at Pengana Capital, reflecting the rising nervousness of some investors.

Since a decadelong commodity-price boom hit the skids about four years ago, mining companies have been busy slashing spending across the board on projects and exploration. The major diversified miners, including Glencore PLC and Anglo American PLC, have more than halved their capital-spending budgets from their highs earlier this decade, as iron ore has plunged 70% from its 2011 peak and coal prices have fallen by as much as 80%.

Some shareholders see that defensive stance as costly in terms of missed opportunities. Given that new mines can take years to plan and build before they begin generating cash, many investors are eager for resources companies to map out clear strategies that will serve them beyond the downturn. , fearing inaction could deny them future windfalls.

“You can’t avoid the fact that these are capital-intensive businesses, and the time to be investing is now,” said Pengana’s Mr. Ronge.

George Boubouras, chief investment officer at Contango Asset Management, who has been underweight the sector for the past year, is also concerned by what some investors see as the lack of room for substantial earnings growth.

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