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Resourcehouse pulls IPO

June 6, 2011

“Australian billionaire Clive Palmer shelved his fourth attempt in two years to take mining company Resourcehouse Ltd. public on Hong Kong’s stock exchange, saying in a statement that worsening global market conditions blocked its plan to raise as much as $3.6 billion.

The move disclosed Saturday marks a rare sour note in the hot Hong Kong IPO market. The Chinese city has been the world’s No. 1 market by money raised for the past two years and is poised for another strong performance this year amid China’s fast-growth and the market’s considerable liquidity.

Resourcehouse’s decision comes after concerns the debt problems in the euro zone and slower growth in China would take a toll on demand for commodities. But investors were also discouraged by the company’s weak financials, analysts said.”

Source: Wall Street Journal, June 5 2011

Observations:

  • Resourcehouse is trying to raise several billions of dollars to enable development of the China First Coal (Queensland) and China First Iron Ore (Western Australia) Projects, which should start production in 2014.
  • The company has partnered with various Chinese companies in offtake, logistics and development deals. Most important Chinese partners are Metallurgical Corporation of China Ltd. (MCC) and China Power International (CPI).

Overview of operations from corporate website

Implications:

  • The uncertain future of European government debts and the slowing growth of China are mentioned as the reasons to call of the IPO. Demand for the shares is insufficient to support the intended launch price. As the uncertainty about European government finances is expected to continue for several years and China is trying to stabilize growth at a rate lower than in the previous decade it is unlikely that Resourcehouse will be able to raise the $3bln it intended.
  • The company might partner in development with one of the other diversified miners active in Australia or with an additional Asian partner to raise the capital required.

©2011 | Wilfred Visser | thebusinessofmining.com

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