Resources starting to dig back out of hole

THE resource sector has bottomed out but its return is being announced with a whimper rather than a bang, a leading investment bank says.

Morgan Stanley says the latest profit updates from mining companies show the worst is behind the sector and commodity prices have bottomed out.

Morgan Stanley analyst Nathan Lim said the sector was staging a comeback but not in the frenetic manner of the previous cycle.

“Rather than with a bang, resource companies have crept back into our view following a cycle of attrition, survival and finally stability in the sector,” he said.

Former Rio Tinto chief Tom Albanese – now heading the India-focused Vedanta Resources – this month said the tide had turned for the industry.

Glencore boss Ivan Glasenberg also said the storm over the sector appeared to have broken when handing down his latest profit update.

However, the local heads of Australia’s two major mining companies remain cautious.

Rio’s new chief Jean-Sebastien Jacques noted commodity prices had bounced back but warned the market would remain “challenging and volatile”.

BHP Billiton will hand down its full-year profit report next week. The price of iron ore has risen 40 per cent, thermal coal 35 per cent and gold and oil 25 per cent this year.