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Posts Tagged ‘stock market’

Resourcehouse pulls IPO

June 6, 2011 Comments off

“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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Australian Miners Look West for Capital

November 8, 2010 Comments off

“After providing a flood of capital when the rest of the world was closing its checkbooks during the financial crisis, China’s mostly state-controlled mining sector is likely to find itself increasingly outgunned in the race for Australian resources, according to bankers to the industry.

‘Through the financial crisis, China was the provider of capital of last resort,’ said Alan Young, a managing director at J.P. Morgan in Sydney. ‘What you’re seeing now is that companies have other options.’

The return of commodities prices to historic highs in recent months has changed the equation, making funding from Asian end-users more of an option than a necessity.”

Source: Wall Street Journal, November 3 2010

Observations:

  • Various Australian mining firms have raised money on stock markets (Fortescue, MacArthur) now that investors turn back to markets and interest in mining stocks is increasing. This reduces the need for the mining companies to raise cash by partnering with cash-rich Chinese firms.
  • The increase of the exchange rate of the Australian dollar versus the American dollar and the Chinese Renmimbi further decreases the attractiveness for Chinese firms to invest in Australian mining property.

Implications:

  • Chinese companies have ongoing interest in expansion abroad. As they will have to compete with other sources of money for western companies they will resort to offering more favorable conditions or to acquiring foreign assets.
  • The increasing competitiveness to act as financer of mining projects strengthens the need for the Chinese mining and metals industry to consolidate; creating less but stronger companies that have the power to make international deals.

©2010 | Wilfred Visser | thebusinessofmining.com