In the past two months the world’s largest mining groups have lost more than 25 per cent of their value as investors have grown concerned about the impact of an economic slowdown on demand for their products. Shares in BHP Billiton, Rio Tinto, Anglo American and Xstrata have slumped since the end of May, but now the sell-off looks overdone.

Concern about the mining sector’s prospects is understandable, given that lower consumer expenditure and a stalled construction sector means less demand for raw materials such as steel, iron ore, aluminium and copper.

However, these are worries specifically related to the American and European markets. The economic story is very different in other parts of the world.

Rapidly growing regions such as China, India and the Middle East are expected to experience only a slight slowdown in the coming year and they matter far more to the fortunes of London’s listed miners than anywhere else.

China, in particular, is consuming every extra tonne of material that these miners can dig out of the ground and global supply is now so tight that the prices for key metals have continued to rise despite the transatlantic difficulties.

BHP, the world’s largest miner, published its production report for the year to the end of June yesterday and this showed substantial supply increases in commodities that are gaining value.

For example, BHP’s iron ore production increased by 15 per cent, while prices have risen by 96 per cent. Manganese production rose 9 per cent for a commodity that is expected to triple in value this year.

These are similar gains to those reported by Rio Tinto last week, although BHP has the added advantage of owning a petroleum division, which increased production by 20 per cent in the past year while prices doubled.

Rising commodity prices combined with increasing supply seems to suggest a strong buying opportunity, not cause for selling stock.

Even when there have been drops in production, which has happened to a number of BHP’s commodities over the past year, the resulting supply crunch has tended to push up prices to compensate.

BHP said yesterday that production from Chile’s Escondida mine, the world’s largest source of copper, would fall by up to 15 per cent next year because of declining ore grades. Analysts forecast that this would cause copper prices to rise.

BHP’s aluminium production was down 3 per cent because of South Africa’s electricity supply problems and these difficulties are likely to continue, underpinning sustained high prices for the lightweight metal.

BHP’s coal exports from Australia fell 8 per cent compared with last year because of poor weather and delivery delays at congested ports. The weather in eastern Australia may have improved but the ports are just as busy and this, too, will underpin prices for the rest of the year.

The gloom descending on the British and American economies can sometimes seem inescapable, but investors should be wary of assuming that all companies are equally exposed to the bad news.

Anyone looking for protection from slowing consumer and construction markets in the UK should consider access to the continued strong growth in Asia via the mining sector, particularly when share prices are 25 per cent below recent highs.

BT

In a note to clients yesterday, Mark James, telecoms analyst for Collins Stewart, failed to find one positive aspect across the whole of the European telecoms scene. Identifying what he did not like was easier: “Pretty much the whole sector,” he said. Nor is there much prospect of the gloom lifting. Faced with a squeeze on consumer’s purses and the falling cost of making calls, analysts expect the sector to underperform for some time.

Into this troubled industry has stepped Ian Livingston, BT’s new chief executive, who is due to report his first quarterly results next Thursday. It will give him his first big chance to lay out his long-term plans for the business. In April, when it was announced that he would take over from Ben Verwaayen, Mr Livingston said that he would not change the company’s strategy. Yet last week, less than two months into the job, he unveiled a proposal to invest £1.5 billion in new fibre-optic links, aiming to cover about ten million homes by 2012. One wonders: what next?

More specifically, what of BT’s global services unit, which has been edging towards a 15 per cent margin? How will it cope in a slowing macro environment? Although IT expenditure may be falling, BT’s role in this area is to save companies money by outsourcing their IT systems. A tough economic climate could, therefore, bring the group more customers, not fewer. Its consumer services business is comparatively well shielded, meanwhile, as it does not have any retail shops.

True, with BT’s broadband deals at the higher end of the price bracket, a combination of slowing broadband penetration and that wider consumer slowdown could prove damaging. But while Carphone Warehouse has blamed slowing sales of broadband on fewer people moving home, the property slump has served to reduce BT’s customer churn.

With more customers opting for flat-rate broadband and call packages, BT is not seriously affected by a fall in the number of calls made. Furthermore, Ofcom is likely to allow BT to raise the prices that it charges other telecoms groups to use its networks.

BT’s shares have fallen 36 per cent in the past 12 months, closing yesterday up 4¼p at 202¼p. With the more bullish analysts setting target prices as high as 300p with an upside of 49 per cent, this could be a good time to buy.

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