BHP, Rio, Fortescue Shares Up on Higher Iron Ore Prices: Sign of Mining Boom Return?

The strengthening price of iron ore in the global market which resulted in share prices of three major mining companies go up has led to speculations that Australia's mining boom may be making a comeback.

BHP Billiton (ASX: BHP) stocks were 19 percent up compared to 2012, Rio Tinto (ASX: RIO) shares were also 37 per cent higher while Fortescue Metals Group (ASX: FMG) enjoyed a 60 per cent surge in shareprices.

BHP reached a peak of slightly over $38 per share toward the end of 2012 but closed $36.68 on Friday. Rio went beyond $68 at the start of 2013 but has settled down to $65.80 at the close of trading hours on Friday. Fortescue closed $4.73 on Friday but traded above $5 at the start of 2013.

The growing shareprices is because of the recovering prices of the commodity in the global market from a low of $86 a tonne in 2012 to the current $158.

Last year's drop in iron ore prices, accompanied by a slowdown in demand from China, BHP's decision to postpone expansion plans for the Olympic Dam project and the yearend fear of a fiscal cliff for the U.S. contributed to the decline in price of the steelmaking ingredient.

While HSBC chief economist Paul Bloxham opined that reported of the end of the mining boom was exaggerated because it was never gone, Credit Suisse analysts warned the start-of-the-year jump in iron ore prices could be a last run before prices tumble down to $125 this year and further dip to $90 in 2015 as supply catches up with demand.

However, Mr Bloxham insisted, "High commodity prices seem to be the new normal, as the rising importance of the emerging economies means global growth is more 'commodity intensive.'"

Last year's price dip, though, will result in no mining tax payments for the three miners and Xstrata since the drop in iron ore prices failed to boost the miners' profits beyond the payment threshold, The Australian reported.

The federal government initially estimated $2 billion revenues from the mining tax in 2013, but recent developments may spur a review of the tax structure and place more pressure on the government's budget plan in view of the deferral of the anticipated budget surplus.