Blog > International Investing > Resource Mining Stocks: BHP rebounds from Rio rebuff; WorleyParsons, Saudi Aramco deal may be close
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Resource Mining Stocks: BHP rebounds from Rio rebuff; WorleyParsons, Saudi Aramco deal may be close

Posted November 28, 2007

“We suspect that construction and infrastructure and engineering stocks are going to have a good 2008 with all this spending in the pipeline. And not just in Australia.” — Dan Denning 

by Dan Denning, Daily Reckoning Australia and TFN

Blogger’s Note: We saw this piece on the site of the Daily Reckoning Australia. If you don’t believe me, read it here in the original.

Baltimore and Port Philips, Australia — (TFN): BHP Billiton (ASX:BHP) puts its best foot forward again this week with its Annual General Meeting. The company will have to rebound from Rio Tinto’s (ASX:RIO) convincing rejection earlier this week. Rio told investors it has a superior pipeline of projects that are closer to production than BHP’s. It also said it’s got an multi-billion dollar plan to double iron ore production to 600 million tonnes per year.

Will a higher offer come? Will there be another suitor? Or a multi-player deal? We don’t know. But we do suspect that the construction and infrastructure and engineering stocks are going to have a good 2008 with all this spending in the pipeline. And not just in Australia. Did you see that Worley Parsons (ASX:WOR) is in discussions with Saudi Aramco to build a new 400,000 barrel per day refinery near the existing mega-facility at Ras Tanura? Wow. It’s a potential AU$9 billion deal, which is one reason we recently tipped Worley as a blue-chip resource stock in Outstanding Investments.

A little detail in the deal is more eye-catching than the total contract. The refinery is for heavy crude oil. The Saudis are famous for their light-sweet crude. What they’ve been producing for years doesn’t take a lot of refining (cracking the hydrocarbon chain). The good news, the oil price would suggest, is that the Saudis intend to expand production. But the crude lining to the story is that the cheap, high-quality stuff in the Kingdom is closer to the end of its production life than the beginning.

***Read more resource- and gold-related stories at The Daily Reckoning Australia.

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