That’s recession and the merest hint of the word sends Australian policymakers in to paroxysms of anger.
For example, here’s David Gruen (the Treasury’s chief macroeconomist) speaking before a Senate hearing last week.
Which is a pity because Pidgley, adopted from Barnardo’s at the age of four by travellers, could give him some tips on how to run a cyclical business and maximise returns to shareholders. (Something, of course, his predecessor conspicuously failed to do). Read more
BHP Billiton is taking a step back from its planned $20bn expansion of its Olympic Dam copper and uranium mine — as many had suspected it might.
The company wrote down $346m on its investment so far in the South Australian project. That, combined with writedowns on its North American shale gas assets, led to a 21 per cent decline in its full-year profit after tax. Read more
Thirty five dead, shares off 3.4 per cent at pixel time on Friday…
Beny Steinmetz Group, the privately-held natural resources company, plans to float Sierra Leone’s biggest diamond mine on the Hong Kong stock exchange, the FT reports. Beny Steinmetz, founder of the company, confirmed the “good possibility” that the Koidu diamond mine, expected to produce 500,000 carats this year, will be offered to Hong Kong investors in the second half of 2012. A BSG spinoff called Octea, the new holding company for Koidu, will aim to raise $400m-$600m and achieve a valuation of $2bn-$3bn. Tiffany & Co, the US jeweller, sources many of its diamonds from the mine. Read more
Caterpillar, the world’s biggest maker of earthmoving equipment, has strengthened its presence in the mining machinery market by striking an $886m deal to buy ERA Mining Machinery, a Chinese manufacturer of underground coal-mining equipment, reports the FT. Buying ERA would enable Caterpillar to make further inroads into China where coal mine operators tend to prefer local brands over US equipment. The proposed acquisition builds on Caterpillar’ $7.6bn purchase last year of Bucyrus International, another maker of mining machinery. That deal transformed the company into the world’s biggest supplier of large mining equipment. Read more
Anglo American has sold a significant stake in some of its most prized assets in Chile for $5.39bn to Mitsubishi, the Japanese trading house, in a deal that torpedoes the attempt by Chile’s state miner Codelco to buy the same assets at much lower prices. The FT reports the pre-emptive sale of 24.5 per cent of Anglo American Sur, whose star asset is the Los Bronces copper mine, is likely to spark legal action from Codelco, which was planning to buy half of the same assets exercising an option in place since 1978. The price paid by Mitsubishi is a hefty premium to the valuation under the Codelco option. For Mitsubishi, the deal will double its annual copper output, says the WSJ. Read more
ENRC could have saved itself $600m and some potential blushes, at least for now.
Instead of asking independent shareholders to vote on a plan to buy the remaining 75 per cent of thermal coal producer Shubarkol from its oligarch founders, the company will instead request that the meeting be adjourned. Read more
Mining executives are anticipating a pick-up in deal-making with the sharp 40 per cent drop in sector share prices over the last 10 months flushing out corporate predators, reports the FT. Sector executives and bankers see the share price falls, which have intensified over the last three weeks, as opportunity to buy up scarce natural resources near the bottom of the cycle. This has pushed valuation metrics, such as price-to-earnings multiples, below five-year averages, executives told the Financial Times at the annual LME Week, the largest meeting of the mining and metals sector.
Australia’s economy rebounded strongly in the second quarter, the FT reports, with higher-than-expected growth of 1.2 per cent driven by business investment, household spending and a build-up in inventories. The gross domestic product figures, which followed a revised 0.9 per cent contraction in the economy in the quarter that ended in March, signal a recovery in Australia, after floods and cyclones at the turn of the year damaged the nation’s mining and agricultural sectors. Most economists had forecast between 0.9 and 1 per cent growth in the quarter, but the stronger outcome helped take the nation’s annual economic growth rate to 1.4 per cent.
Glencore has confirmed its interest in taking over South Africa’s Optimum Coal for $1.2bn, in a deal that would transform the company’s position at one of the world’s largest coal ports, reports the FT. Glencore and Cyril Ramaphosa, the South African billionaire, are prepared to offer R34 a share for Optimum, a second-tier domestic coal miner, in a deal valuing the company at R8.56bn ($1.2bn). This is Glencore’s first major takeover following its flotation, writes the Telegraph. It adds that in adherence with South African rules on black ownership, Glencore’s bid was made via an investor group and its local Black Economic Empowerment partner, Ramaphosa. Read more
BHP Billiton, the world’s largest mining company, reported an 86 per cent rise in its annual net profit on Wednesday and said it expects commodities demand to remain strong despite China’s efforts to cool its economy, the WSJ reports. The Melbourne-based company blamed global imbalances and high levels of sovereign debt in the US and Europe for continuing to create uncertainty. The company called on policy makers to make a coordinated response that “has the potential to engender confidence and ease the volatility” in markets. They added that fixed-asset investment in China, which has been the engine of global growth since the financial crisis, has yet to fully reflect Beijing’s moves to tighten monetary policy and rein in excessive lending, it added. “Despite these near-term challenges, we remain positive on the longer-term outlook for the global economy,” BHP said in a statement. Overall, BHP’s net profit rose to $23.65bn in the fiscal year ended June 30, bolstered by strong iron prices, compared with a net profit of $12.72bn a year earlier. Full-year revenue rose 36 per cent to $71.74 bn. Read more
Nothing has been harder hit in the current market swoon (in London at least) than the mining sector.
BHP Billiton has declared force majeure on exports from the world’s biggest copper mine, the FT reports, as a mineworkers’ strike entered its eighth day. The strike at BHP’s Escondida mine in Chile, which supplied 7 per cent of the world’s copper last year, comes in a month of widespread mining strikes from Indonesia to South Africa. Early on Friday in Singapore, three-month copper LME futures rose to their highest level since April, Reuters says. Read more
UK shareholders have received their largest dividend pay-outs since the collapse of Lehman Brothers almost three years ago, in a sign that companies are increasingly confident about the health of their balance sheets, the FT reports. Companies returned £19.1bn to shareholders in the three months to July, 27 per cent more than the £15bn issued during the same period a year earlier, according to research from Capita Registrars. Mining companies returned £1.85bn during the quarter - an almost four-fold increase on a year earlier – on the back of surging commodity prices. However higher dividends were a feature across most sectors. Read more
BHP Billiton said iron ore production rose for an 11th consecutive year, in a market update that underlines confidence the mining giant will next month report a near doubling in financial full-year net profits to $23bn, the FT reports. Shares in the Anglo-Australian listed miner rose nearly 2 per cent to A$43.44 by the Sydney close on Wednesday after BHP said that in addition to iron ore it had set annual production records for the period ended June in manganese ore, parts of its nickel unit and in natural gas. BHP’s natural gas division was boosted by a maiden contribution from the $4.7bn acquisition earlier this year of Arkansas-based shale gas assets from Chesapeake Energy of the US. The miner last week placed another large bet on the US shale gas industry when it announced an agreed $12.1bn for Houston-based developer Petrohawk. The miner’s annual production of iron ore rose 8 per cent to 134m tonnes, while growth of 7 per cent in the four quarter compared with the third came in spite of a disruption caused by a train derailment. Read more
China’s Sichuan Hanlong Group offered A$1.2 billion in cash for the shares of Australian-listed Sundance Resources it doesn’t own to gain control of a $4.7bn iron ore project in Cameroon, Bloomberg reports. Hanlong, which owns 18.6 per cent of Sundance, offered 50c a share for the Perth-based company, valuing it at A$1.4bn. The offer is 25 per cent higher than Sundance’s closing share price on Friday. It is the second takeover offer in recent weeks lodged by Hanlong for an Australia-listed company exploring for minerals in Africa, Reuters notes, after it bid A$144m last month for Bannerman Resources, which is looking for uranium in Namibia. Read more
Planned for a mid-2012 start, the scheme would initially price CO2 emissions at $23 per tonne, rising 2.5 per cent a year for the first three years, before moving to a market mechanism. It would apply to the top 500 polluters, excluding the agriculture sector and light vehicles. Read more
The London Stock Exchange does not have a great track record of consummating deals (remember the proposed Deutsche Borse transaction of the 2001?) or grabbing big strategic opportunities.
Global spending on mining, energy resources and commodities will surpass pre-crisis levels next year, according to an emerging industry consensus, indicating rising confidence in an economic recovery led by China and other fast-growing markets, reports the FT. The boom in capital expenditures, across oil, natural gas and agribusinesses, comes as prices jump for commodities such as copper, iron ore, crude oil and wheat. It also raises the prospect of short-term bottlenecks in the already stretched supply of equipment and services, and project delays as costs rise. Global mining expenditure is set to hit a record $115bn-$120bn next year, above the peak of $110bn set in 2008, according to a survey of industry executives and consultants. Read more
A little bit of takeover tussle Down Under highlights the long-held ambitions of Anglo-Swiss miner Xstrata to add iron ore to its coal and metals-focused businesses.
Not only that, Xstrata’s hot pursuit since August of Australia’s Sphere Minerals (in which it holds an 8.15 per cent stake) sends a clear sign that the earlier hysteria among big miners — domestic and foreign — over investing in Australian resources companies amid fears of a mining ‘supertax’, is all in the past under the new Gillard government. Read more
Vedanta Resources, the London-listed Indian mining group, is to take a majority stake in Cairn India for up to $9.6bn (£6.17bn) in cash in a deal that would give it control of one of India’s biggest onshore energy assets, reports the FT. In a statement, Vedanta, India’s largest mining company, said it would purchase between 51 and 60 per cent of Cairn India, which is 62.4 per cent owned by Cairn Energy, for between $8.5bn and $9.6bn, potentially providing a huge multibillion pound windfall for shareholders of the British oil explorer. The deal values Cairn India at $16.6bn. According to Bloomberg, credit-default swaps linked to Vedanta debt rose 116 basis points to 649, the highest since May. Read more
And to think Friday used to be the day when we only heard daft rumours about takeover bids in London, rather than actual fact-based stuff.
Exhibit A — an Indian press report that Vedanta is taking a 51 per cent stake in Cairn India for between $8bn and $8.5bn, according to Reuters – which has also heard news of a majority stake from sources. Read more
Julia Gillard, Australia’s newly crowned prime minister, has declared a truce with the country’s powerful mining industry over a controversial new resources tax, saying she would “throw the doors open” to the sector to discuss the levy, the FT says. Ms Gillard made no promises about changes to the tax but her promise to open negotiations prompted positive statements from the two giants of the industry in Australia, BHP Billiton andRio Tinto. Read more