Introduction
Welcome to the March edition of the Australian Resources Sector Update, a monthly publication prepared by Corrs Chambers Westgarth for clients who are interested in the Australian resources industry.
This publication brings together a brief summary of information on recently completed deals, market rumours and potential opportunities, and relevant regulatory updates.
Recent Announcements
ASX-listed BHP Billiton announced on 20 February 2013 that Marius Kloppers will retire as Chief Executive Officer on 10 May 2013 and Andrew Mackenzie will succeed him. Currently, Mr Mackenzie is BHP Billiton's Chief Executive of Non-Ferrous Mines.
Further to our story in the January/February 2013 edition of the Australian Resources Sector Update, ASX-listed iron ore miner Sundance Resources announced on 8 February 2013 that China's Hanlong (Africa) Mining Investment's offer to acquire all of the issued shares in Sundance Resources at A$0.45 per share remains open. Under the revised timetable for the deal, Hanlong must provide credit approved term sheets from its financiers by 26 March 2013 and provide final Chinese regulatory approvals by 9 May 2013. Provided that shareholders and the Federal Court approve the scheme, shareholders will be paid the scheme consideration on 27 May 2013. The Sundance Board continues to recommend the deal to its shareholders.
Jindal Steel and Power (Australia) announced on 31 January 2013 an unconditional bid for all of the issued shares in ASX-listed coal miner Gujarat NRE Coking Coal at A$0.20 per share. On 1 February 2013, Gujarat announced that it had received a bidder's statement from Jindal and that shareholders should take no action until they have received the target statement which would make a formal recommendation to shareholders. Gujarat confirmed that it had been advised that the Gujarat NRE group companies, which hold approximately 64% of Gujarat's issued share capital, do not intend to accept the offer. On 5 February 2013, Jindal announced that it would not increase its offer price of A$0.20 per share. The offer period commenced on 15 February 2013 and will close at 4.00pm on 15 March 2013.
ASX-listed iron ore miner Mindax announced on 24 January 2013 that it is currently holding discussions with a potential strategic partner in relation to its Mt Forrest Iron Project located in Western Australia. The announcement noted that the partner will assist in fast-tracking the feasibility and development of the direct shipping ore components of the Project.
On 25 January 2013, Gina Rinehart and Hancock Coal Prospecting divested their stake in ASX-listed coal miner Mineral Resources. According to a report in The Australian, the shares are worth A$150 million and amount to 8% of Mineral Resources' issued share capital.
Recently completed deals
ASX-listed coal miner Coal of Africa announced on 31 January 2013 that it has received a US$80 million placement from China's Haohua Energy International (Hong Kong) in addition to the US$20 million investment made by Haohua Energy in November 2012. The announcement of the placement followed the receipt of approvals from Coal of Africa shareholders, the Australian Foreign Investment Review Board and the Chinese Government. The US$80 million placement was made at £0.25 per share on the London Stock Exchange and trading has now commenced. David Brown, Chairman of Coal of Africa, stated that this partnership between Coal of Africa and Haohua Energy will assist in the development of Coal of Africa's assets.
Market Rumours and Opportunities
Further to our story in the January/February 2013 edition of the Australian Resources Sector Update, it has been reported that Rio Tinto is yet to find a buyer for its Mozambique coal assets and may struggle to do so. It has also been reported in The Australian that Rio Tinto could seek an A$2 billion listing of its Australian and New Zealand aluminium assets. Rio Tinto has reportedly already established an advisory board to arrange the listing. In other news, in a press release made on 14 February 2013 in relation to Rio Tinto's 2012 performance and 2013 strategy, Rio Tinto stated that Phase one of the Pilbara iron ore expansion in Western Australia has been accelerated and is now due for completion during the third quarter of 2013.
The Australian Financial Review has reported that China's State Grid is interested in acquiring The Pilbara Infrastructure owned by ASX-listed iron ore miner Fortescue Metals Group. Reportedly, indicative offers from potential buyers were due on 15 February 2013. It is thought that the deal could raise between US$3 to US$4 billion. The Australian Financial Review had earlier reported that Fortescue aimed to shortlist buyers by the beginning of March 2013. Chief Executive Officer of Fortescue, Nev Power, has reportedly indicated that Fortescue hopes to enter into a deal with a prospective buyer by the end of the first quarter 2013. It has also been reported that Fortescue is considering other asset sales including a stake in one of Fortescue's mining projects. However, Power has reportedly stated that the infrastructure sale is Fortescue's primary focus at this time.
It has been reported in the Australian Financial Review that Nathan Tinkler may be seeking finance in order to make a further takeover offer for ASX-listed Whitehaven Coal. It was reported that the standstill agreement, which prevented Tinkler from making a new offer, has now expired. However, it has further been reported that Tinkler is unlikely to be able to obtain finance.
Australia's Malabar Coal is reportedly planning to list on the ASX in an attempt to raise $A20 million to develop its Spur Hill Coal Project located in New South Wales. It has further been reported that the directors of Malabar Coal are not seeking to divest any of their shares as part of the listing.
The Australian Financial Review has reported that BHP Billiton Mitsubishi Alliance (BMA) is considering divesting its Gregory Crinum coal mine located in Queensland. It was reported that BMA is selling the mine as part of a larger asset disposal and that the mine may return up to A$800 million in a sale. It has been reported that possible buyers include competitors such as Switzerland's Glencore and Britain's Anglo American. A BMA spokesperson has reportedly stated that a decision to move forward with the sale would not be made for another six to nine months and would be determined partly by market interest.
It has been reported in The Times of India that ASX-listed MetroCoal has approached India's NTPC in relation to forming a joint venture for the development of MetroCoal's Bundi Mines Project in Queensland. It has been reported that MetroCoal's board has approved a resolution to find a partner for the Bundi Mines Project on the basis that the partner be an end-user. Reportedly, the board will offer up to a 50% interest in the Bundi Mines Project to a new partner who will also share in the project's coal output in proportion to its interest in the project.
Singapore based GVK Coal Developers, which is part of India's GVK Group, has reportedly met with Chinese companies in relation to a potential divestment of an interest in its Australian coal and infrastructure assets. These assets include a 79% interest in the Alpha Coal and Alpha West Coal mines, a 100% interest in the Kevin's Corner mine, a 500 kilometre rail link and an 80 Mtpa port terminal in Abbot Point, all of which are located in Queensland. It has been reported that GVK requires approximately US$10 billion to develop the assets and it will need to raise external equity to fund it. It has also been reported that GVK recently met with China Coal and China Shenhua Energy in relation to potentially divesting a stake in the Abbot Point project. Reportedly, China Coal and Shenhua are currently reviewing the proposal and are yet to reach a final decision.
Regulatory Updates
Native Title proposed amendments
A number of submissions have been made to the House Standing Committee on Aboriginal and Torres Strait Islander Affairs (Committee), which is currently reviewing the Native Title Amendment Bill 2012 (Cth). The Bill proposes to clarify the meaning of "good faith" and streamline the processes for Indigenous Land Use Agreements. The Minerals Council of Australia indicated in its submission to the Committee that the Government had not provided any clear rationale for the proposed changes, and that the available data did not support a need for these changes. The Western Australian Government asserted in its submission to the Committee that changes to the right to negotiate provisions would "add red tape to an already complex system". The Western Australian Government stated that the proposed amendments would prolong future act mediation and arbitration and increase the costs and risks facing the resource industry. Submissions on the Bill were due on 25 January 2013 and the Committee's report is due on 18 March 2013.
Mining Amendment Act 2012 (WA)
Further to our story in the January/February 2013 edition of the Australian Resources Sector Update, the Mining Amendment Act 2012 (WA) commenced on 2 February 2013.
Other News
Indian coal pooling
The Indian Government has given an in-principle approval for pooling prices of domestic and imported coal in the hope that this will assist the power sector to afford imported coal. At this stage, the Indian Government has reached an in-principle decision and the Coal and Power Ministries will return to the Cabinet Committee on Economic Affairs with the operational details of the arrangement. The Ministry has proposed that pooling should be applicable only to plants set up before 31 March 2009.
The proposal has met with varied reactions. Power producers have welcomed the move to approve the coal pool price concept. However, Coal India, India's largest miner who supplies 80% of fuel to power plants in India, is of the view that price pooling of domestic and imported coal would result in an extra burden on state power utilities. There has also been some reported opposition from provincial governments.
Mineral Resources Rent Tax Receipts
The Australian has reported that Australia's Mineral Resources Rent Tax (MRRT) revenue for the first two quarters of its operation was A$126 million. The predicted revenue for this period was A$2 billion. Federal Treasurer Wayne Swan stated that the expected revenue has been strongly affected by global instability, commodity price volatility and a high Australian dollar.
Mining industry criticises Federal Government proposal
The Federal Government has announced a plan to introduce legislation that would require large companies to give local firms the opportunity to bid for contracts before sending the contracts overseas. The legislation would require projects worth A$500 million or more to implement an Australian industry participation plan and projects worth A$2 billion or more to apply for concessions and to establish an 'industry opportunity officer' role within their supply office. Prime Minister Julia Gillard stated that the policy aims to provide Australian firms with a fair opportunity to win work on major projects and to maintain the competitiveness of the local manufacturing industry. The Federal Government predicts the plan will inject A$1.6 billion into the economy and plans to fund the plan by removing a tax concession for large businesses.
The Minerals Council of Australia (MCA) and Queensland Resources Council have both been reported to oppose the plan, with MCA Chief Executive Officer Mitch Hooke reportedly saying that the legislation was uncalled for as Australian mining companies already use more than 80% local goods and services. However, Chief Executive of the Australian Chamber of Commerce and Industry, Peter Anderson, has reportedly stated that the plan deserves support.
Mongolian draft mineral legislation
On 5 December 2012, the Mongolian Government released its draft "Minerals Law". It has been reported that the legislation will give the Mongolian government the right to a free stake in mining projects and will shift Mongolia away from the free-market principles which have operated since the 1990s.
The proposed changes to Mongolia's minerals law have met considerable opposition. On 1 February 2013, 150 members of the mining industry participated in a forum in relation to the draft minerals law. It is reported that the general consensus at the forum was that the law would change the landscape of the mining industry in Mongolia, and it would be challenging for mining companies to remain profitable. The Business Council of Mongolia Executive Director Jim Dwyer has reportedly stated that the "draft minerals law will hurt all investment in mining in Mongolia, local as well as foreign...".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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