A South African mining analyst and equity fund manager believes the present is not the right time to invest new funds in commodities as mining companies might see flat earnings from next year.

Gary Quinn, mining analyst and equity fund manager at Prudential Portfolio Managers (SA) says although the worldwide commodity boom might still be in full swing, South African mining houses may see flat earnings from 2009 as they battle with costs and production problems.

Quinn said the group was increasingly developing a muted view on earnings growth in the mining sector and it would be difficult for share prices to increase if earnings moved sideways.

The analyst believes that supply and infrastructure problems that have driven commodity prices high, will eventually impact on the earnings growth potential of these stocks.

While supply constraints continue to push up commodity prices, mining houses are increasingly feeling the pinch of rising production costs against lower output. This will impact on their ability to grow earnings, he said.

Quinn added that mining companies were not able to pass on increasing costs to customers as commodity prices were not set by individual companies. They had no choice but to absorb cost increases and to find ways to cut costs.

If they don't and earnings start to move sideways, before eventually dropping, the boom cycle will make way for the bust cycle, he said.

Quinn said the commodities boom has lasted for such a long time that it was difficult to know the ultimate top of the cycle. The downturn of the cycle may be just as gradual as the upswing, but the analyst believes the boom cycle is about 80% complete.

However, there were still opportunities in paper and steel as paper prices are lower compared to 1999 and profitability in steel is up by 30%.