Minerals boom under cloud as market romance begins to cool

Bumper profits from Australian mining giants BHP Billiton and Rio Tinto this month have proved last year was the best yet for the country's resources sector. But there are some conflicting views on whether the good news will continue to flow for investors this year.

The Australian Bureau of Agricultural and Resource Economics says the country's mineral exports tallied more than A$25 billion ($143.22 billion) last year, and the figure reflected on BHP Billiton's Australian record interim net profit of US$4.36 billion announced this week and Rio Tinto's earlier US$4.95 billion full-year result.

The two companies' performances have been credited with triggering a succession of new highs for the Australian share market, with the main benchmark gaining 18 per cent last year.

Not only are shareholders in both companies grinning over the share price gains, they are also delighted at their higher dividends and buy-backs - A$4 billion from BHP and A$5.3 billion from Rio by the end of next year. BHP has soared 130 per cent and Rio 185 per cent over the past three years.

'I think it is pretty clear we are not seeing a slowdown in China in terms of commodity demand' was the bullish assessment of BHP's normally reserved chief executive, Chip Goodyear, this week.

Most analysts are confident that demand from China - the main driver of the boom - will continue to deliver good results for both firms this year, but whether their share prices will reflect that is another matter. Questions are being asked whether now is the time for some profit taking on the miners.