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Posts Tagged ‘Whitehaven’

Mining Week 29/’12: Chilean peace talks

July 15, 2012 Comments off

Top Stories of the Week:

  • Anglo American and Codelco extend talks about Sur
    • Anglo American and Codelco agreed to suspend legal action in the lawsuits filed by both parties in the conflict around ownership of the Anglo Sur projects in Chile until August 24 to have more time to try to settle the dispute out of court.
    • Chilean media reported that a potential solution to the dispute might involve minority shareholder Mitsubishi to give up a small stake to enable Mitsui to build up a stake. Anglo sold 49% of the project at a high valuation after Mitsui and Codelco made agreements about a deal based on Codelco’s option to buy into the project.
    • Sources: Financial Times; Wall Street Journal; Anglo American press release
  • Agnelli heads new mining consortium in Brazil
    • Vale’s former CEO Roger Agnelli will head a new mining venture set up by investment bank BTG. Initial capital of the new venture: B&A Mineração.
    • The new company inherits a stake in a potash project in Brazil and a copper project in Chile and will look into further opportunities in Latin America and Africa.
    • Sources: Wall Street Journal; Financial Times
  • Tinkler continues with Whitehaven bid
    • Whitehaven, one of Australia’s largest coal miners with mines in Queensland, received a buyout proposal by its largest shareholder: Nathan Tinkler.
    • Tinkler already owns 21.6% of the shares and proposes to buy the rest of the shares at a 50% premium to take the company off the stock exchange. Total bid amounts to approx. A$5.2 billion.
    • Sources: Financial Times; The Australian

Trends & Implications:

  • The peace talks between Anglo, Codelco, Mitsui and Mitsubishi underline a trend of the growing importance of alliances and multilateral networks in the industry. As mining projects more and more take place in relatively unstable areas of the world an important mining projects require investments so big that it can hardly be carried by a single company, companies need to build upon the strengths and contacts of other companies and find win-win agreements with governments to successfully develop their projects.
  • B&A Mineracao is the 2nd high-profile mining startup in recent years, after Nathan Rothschild started Vallar 2 years ago. The initial success and quick issues of Vallar’s tie-up with Bumi demonstrated three important lessons for these startups that plan to be big soon: Firstly a powerful financier that can chip in multi-billion investments is needed to gain any importance; secondly a combination with existing producers is the only way in which the growth can be quick; and finally effective ownership and governance arrangements around these alliances are crucial to make the new management successful.

©2012 | Wilfred Visser | thebusinessofmining.com

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Mining Week 25/’12: Whitehaven buyout options; Mine 2012

June 17, 2012 Comments off

Top Stories of the Week:

  • Whitehaven rejects initial offer from largest shareholder
    • Tinkler, largest shareholder of Whitehaven with over 20% of shares, is trying to arrange financing to buy the full group. An initial approach was rejected by Whitehaven as financing of the bid was not deemed solid.
    • Whitehaven became Australia’s largest listed coal group last year after taking over Ashton. Share price dropped approx. 30% over the past 2 months, making the company an attractive buyout target
    • Sources: Wall Street Journal; Financial Times; Reuters
  • PWC launches ‘Mine 2012’
    • Consultancy PWC recently published its annual study on the key industry trends in the mining industry, focusing on the 40 largest mining companies. This year’s report is titled ‘the growing disconnect’, zooming in on the paradox between the need to build new projects to increase supply and the reluctance by shareholders to have their companies commit funds to investment.

Record historical results, high commodity prices, and a bullish outlook shared by many miners continues to underline the industry’s strong fundamentals. But investors’ reluctance to emerge and support growth plans points to a growing disconnect between the market and the mining industry.

Source: PWC

Trends & Implications:

  • PWC identifies the following key trends in their report:
    1. Increased volatility is here to stay
    2. Long-term demand fundamentals remain robust …
    3. … but supply will be the industry’s real challenge going forward
    4. Structural changes to the cost base
    5. Changing fiscal regimes and resource nationalism
    6. Capital expenditure requirements
    7. Can’t bring it on fast enough
  • The report presents the numbers around investment and use of cash for the Top 40 mining companies: $98 billion was invested in capital projects in 2011 and plan for a further $140 billion for 2012. At the same time share prices have decreased across the line. PWC argues 2011 marks the start of the growing disconnect.

©2012 | Wilfred Visser | thebusinessofmining.com

Mining Week 51/’11: Grasberg back in business

December 18, 2011 Comments off

Top Stories of the Week:

  • Freeport McMoran strikes deal on Grasberg
    • Freeport reached a two year extension of the collective labor agreement at its Indonesian Grasberg mine after a 3-month strike. The new agreement holds a 40% wage increase over 2 years, improved benefits, and the promise to base wage future negotiations on cost of living and competitor benchmarks.
    • Only days after the announcement of the agreement a helicopter transporting Freeport’s workers was shot at close to the mine, wounding one person.
    • Sources: Freeport McMoran press release; Wall Street Journal; Financial Times
  • Further coal consolidation in Australia
    • Less than a year after being put up for sale and then declining all offers made Whitehaven teamed up with Aston Resources to create the largest listed coal mining company in Australia with $5.1bln market value. The deal is structured as a shares only acquisition of Aston by Whitehaven.
    • Sources: Financial Times; Whitehaven merger documentation
  • Anglo reassured in South African court
    • The South African court ruled that the department of mines had no right to grant the mining rights of Sishen iron ore mine in the country to a junior mining company with strong ties to some influential politicians, but that instead the Kumba Iron Ore holds the rights to the mine. Kumba is majority owned by Anglo American.
    • Sources: Anglo American press release; Financial Times; Wall Street Journal

    Trends & Implications:

    • The coal mining industry in Australia is still relatively fragmented, with both the diversified supermajors and many domestic listed and unlisted companies active in the industry. Because the mining districts are much less concentrated than the iron ore or gold districts of the country it is harder to achieve economies of scale that would justify many mergers. The deals taken place are mainly based on transportation and sales negotiation synergies.
    • The Wall Street Journal published a good, readable, article this week describing the developments in the mining industry, signaling the combination of two key drivers this year: declining prices, and increasing costs. The resulting low margins will move the focus of many mining companies in the coming years to cost control. However, the winners of this cycle will be the companies that manage to invest during this period with lower profits to build capacity that will make them benefit from the structural increase in prices that will be caused by the structural price increases in the industry. Clearly not all cost increases are structural: equipment and contractor scarcity is mainly a temporary result of an overheated industry; but cost increases resulting from the move to harder forms of mining will stick.

    ©2011 | Wilfred Visser | thebusinessofmining.com

Whitehaven ends talks with potential bidders

May 16, 2011 Comments off

“Whitehaven Coal of Australia has ended talks with potential suitors from Asia and the US after a near-seven month auction failed to elicit a ‘sufficiently attractive’ proposal that it could recommend to shareholders. The collapse of the auction saw Whitehaven’s shares fall as much as 16 per cent to A$5.43 before they recovered to close down 80 cents at A$5.63. The group declined to comment on reports it was seeking offers of at least A$7 a share, valuing its business at A$3.5bn.

China’s Yanzhou Coal, which paid A$3.5bn for Australia’s Felix Resources in 2009, was one of a handful of parties interested in Whitehaven, together with Korea Resources Corp, the South Korean state-owned company. Aditya Birla Group, the Indian conglomerate, and Peabody Energy, the US coal group that failed in its attempt to buy Australia’s Macarthur Coal last year for A$3.8bn, were also understood to have examined a bid for Whitehaven.”

Source: Financial Times, May 16 2011

Observations:

  • A Korean consortium led by Kores launched the only published bid for Whitehaven in February. Whitehaven started an auction procedure after being engaged by other potential bidders. It now appears none of the auction participants is willing to offer a satisfactory price.
  • The recent rise of the australian dollar makes the purchase of Australian assets less attractive. Commodity markets are setting prices in American dollars, while Whitehaven’s costs are mainly in Australian dollars. As a result, costs increase without revenues going up by the same ratio.

Implications:

  • Both the Australian and the American coal mining sectors are going through a wave of consolidation. However, the Australian market is less fragmented, leaving fewer opportunities for interesting mergers.
  • The key driver for consolidation in North America is cost pressure and the access to export capacity, while the drive by Asian steelmakers to secure supplies of coking coal are the key driver for the same movement in Australia (and South East Asia).

©2011 | Wilfred Visser | thebusinessofmining.com

Korean Consortium Leads in Whitehaven Coal Takeover

February 17, 2011 Comments off

“In the latest scramble for Australia’s resources by Asian consumers worried about energy security, a Korean consortium has made an initial offer to buy Whitehaven Coal Ltd., a company valued at 3.5 billion Australian dollars (US$3.5 billion).

The non-binding offer by Korea Resources Corp., known as Kores, and Daewoo International Corp. underscores how volatility in commodity markets is driving consumers to bid more aggressively for high-quality reserves that can be shipped home. Coal prices recently surged to two-year highs after major mines around the world were hit by heavy flooding.

Whitehaven, which produces coking coal used in steelmaking and thermal coal used in power generation from five mines in New South Wales state, put itself up for sale last year in a move to capitalize on this wave of acquisition activity. Updating the market Feb. 7, Sydney-based Whitehaven said short-listed parties have been invited to complete more detailed due diligence and submit binding offers. It didn’t identify potential buyers, but the market expects companies from China, the U.S. and India to be involved.”

Source: Wall Street Journal, February 15 2011

Observations:

  • Whitehaven started an official takeover procedure, in which a list of potential bidders is invited to bid for the company based on information provided by the seller in a data room, last year. Initial offers were due of February 2nd, with binding offers expected over the coming month.
  • Driven by increasing coal prices, various Asian companies have bought Australian coal assets to secure access to raw materials over the past 18 months. China’s Yanzhou Coal Mining, Thailand’s Banpu Energy, and India’s Adani secured deals. China Shenhua (which owns assets near Whitehaven’s mines) and Indian ICVL are named as potential competing bidders for Whitehaven.

Implications:

  • The Korean Consortium will likely not be the only bidder in the takeover process. Typically multiple bidders are led to submit an offer in a takeover procedure in order to maximize the price paid for the company. Potential bidders without operating assets in Australia are not expected to be able to realize high synergies, making the bidder that is prepared to take most risk or that is most optimistic about the value ‘win’ the battle.
  • The buyer of Whitehaven might face regulatory obstacles from Australia’s Foreign Investment Review Board, which forced Yanzhou Coal Mining Co. to list the Australian assets in Australia to keep control over the domestic energy industry.

©2011 | Wilfred Visser | thebusinessofmining.com

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