SOME of Australia's biggest mining and resource stocks have sunk to their lowest in years after another day of selling fuelled speculation about the longevity of the resource boom.
A strong and well-received production report from the nation's biggest company, BHP Billiton, was not enough to drag the market out of its pessimistic mood, with investors preferring to take cues from gloomy Chinese indicators.
The benchmark iron ore price fell below $US130 a tonne for the first time since November, and Shanghai steel futures were priced at their lowest this year, eroding confidence in Australia's iron ore producers and dragging the S&P/ASX 200 Index into negative territory for the first day in four.
BHP lost almost 2 per cent to close at $30.18, its lowest price since March 2009.
Rio Tinto lost more than 3 per cent to close at $52.78, its lowest price since July 2009.
Fortescue Metals Group and Atlas Iron both lost more than 3 per cent, with Atlas plumbing its lowest depths since May 2010, and Fortescue downgraded to a "hold" rating by Deutsche Bank because of this week's cost blowout.
The selling was not confined to iron ore, with the nation's biggest listed goldminer, Newcrest Mining, briefly touching its lowest ebb since November 2008, before rallying slightly higher. Oil and gas producer Santos reached its lowest closing price since October 2008, while uranium producer Paladin Energy was revisiting prices not seen since June 2005.
Goldman Sachs described the recent events in the resource sector as a continuing "train smash" and while the big mining stocks now appear cheap, their appeal with investors may wane further.
Merrill Lynch analyst Peter O'Connor said Rio was increasingly less likely to conduct a round of share buybacks next month following this week's first-half results.
BHP was already considered unlikely to conduct such a round of buybacks given its capital spending commitments, and UBS analyst Glyn Lawcock said more pain could be on the way.
"For the next one to two months there is more downside than upside in price and with weak steel pricing we expect to eventually see steel production cuts," he told AAP.
"I think [BHP] is well placed to manage through this, but that doesn't mean the share price has to respond."
The pessimism emerged despite BHP publishing fourth-quarter results yesterday that were better than most analysts expected.
BHP's iron ore division performed particularly well, with the 40.9 million tonnes produced in the three months to June 30 almost 10 per cent better than expectations.
Deutsche analyst Paul Young said the 174 million tonnes of iron ore produced by BHP's Pilbara operations during the past year was also close to 10 per cent better than the guidance offered by the company a year ago.
Copper production was also higher than the previous quarter and the June 2011 quarter, although the full-year result is lagging the year to June 2011.
Coking coal production remained strong, beating results from the March quarter and the June 2011 quarter. Production for the full year beat the previous year by 2 per cent.