Changes to revised Aussie Growth Forecasts may mean that economic fundamentals may improve project viability for Moly.
Economists are forecasting a delay in RBA rate hikes, as well as a slighly weaker Aussie GDP forecast (cira 2.6% down from 2.8%)... we have already seen a fall in the AUD against the USD hovering at the 0.98cents mark. The longer this stays this way, the better the project modelling fundamentals will be for project viability. To add to the equation, economists have pushed out rate hikes to occur in the second half of the year, rather than commencing in the first half, given recent volitility in the markets and uncertainity over Japan. If you look at the local futures market pricing also now implies a 40% chance of an rate ease by June.
The longer the uncertainity stays in place, and the longer the AUD stays below parity, then conditions will certainly see improvement of conditions for the Moly project becoming viable.
Of course this could all change with another market shock.
Notwithstanding all this the expansionary impacts of the mining boom remain unchallenged, in fact demand of Aussie commodities should rise as Japan rebuilds and commodity prices increase in anticipation of this, boosting the terms of trade, the resources boom could potential be even more supportive than before in the medium term.
Some food for thought.
MOL Price at posting:
89.0¢ Sentiment: Hold Disclosure: Held
