FLX - Felix Resources

[noirua]

Decision of the NSW Supreme Court of Appeal on Friday 8th August 2008: Ulan Coal Mines (90% Xstrata and 10% Mitsubishi) v Minister for Mineral Resources and Moolarben Coal Mines (80% Felix Resources, 10% Sojitz and 10% Korean consortium): http://www.lawlink.nsw.gov.au/scjud...5dbd4806b7efcf20ca257496001b0360?OpenDocument

It does look, at first glance, that the Minister of Mining Resources is likely to lodge an appeal against the three decisions made by Judge Hodges. As the Judge said, "...this was a difficult and complex case." Due to this admittance, it would seem that some of the decision was a matter of his judgement in which he had difficulty.

A major part of the decision concerned the granting of a mining licence over the areas for the underground mines and three open-cut mines, MLA264 and MLA290.
Decision ii) The effect of s75V of the EPA ACT on s62(1) of the Mining Act:
Judge Hodges considered that because there had not been consideration to substantial and valuable structures on the land owned by Ulan Coal, by the Minister of Mineral Resources, that there had been no declaration that they were not valuable and substantial, in accordance with s62(1)(c) of the mining act. Thus the mining licenses should not have been awarded to Moolarben Coal (see 38 23a of judgement "Identification of Valuable works").

 

[Julia]

Noirua, so what is all the court action likely to mean for the SP?
I haven't been following what has been happening and don't know what your post above implies.

 

[noirua]

Noirua, so what is all the court action likely to mean for the SP?
I haven't been following what has been happening and don't know what your post above implies.

Difficult to be quite certain what will happen next. Felix are in talks with other parties about a possible bid for the company and if all this falls through the price could plunge.
Mining stocks have fallen between 25% and 40% recently ( Includes Antofagasta, Xstrata, RIO, BHP, Anglo A, Macarthur Coal, Gloucester Coal, Centennial ... ) and that alone would indicate a price of $14 - $18, and the Moolarben project problems combined with the bid situation put the range $12 - $16 - IMHO.

It seems that the matters mentioned by Judge Hodges which return to Primary Judge, Justice Smart, will be ironed out before the whole position becomes clear.

An appeal to the Federal Court looks entirely in the hands of the NSW Minister of Mining. Whatever happens, the Moolarben Project is held up by 6 months or more. Mining was due to start in the final quarter of 2009 and may be pushed back well into 2010.
The big hold up is the rail and other infrastructure which was underway.
There is also the position of the Korean Consortium and Sojitz to consider as they paid $180 million for 20% of Moolarben with certain provisos that are unclear.

 

[Julia]

Having read today's announcement I am frankly no wiser but presumably the implications are negative in view of the savage drop in the SP.
Anyone heard any more about the takeover speculation?

 

[noirua]

Having read today's announcement I am frankly no wiser but presumably the implications are negative in view of the savage drop in the SP.
Anyone heard any more about the takeover speculation?

Xstrata, the major shareholder in Ulan Coal Pty, stopped producing coal from their Ulan open-cut mine 6 weeks ago. All their mining equipment is now stored on the land that Felix want for mining purposes.
As Xstrata won their case concerning valuable assets on this land, we can guess that they would like some open-cut mining to use all this equipment on.
Felix and the Mining Minister have now to decide, what next, as Xstrata are sitting there wanting a chunk of the action. Xstrata are known to have made a low offer for a joint interest in Moolarben and that position looks unchanged in this environment.

So Four options now: Lodge an appeal to the Federal Courts; try and get an agreement back in the Primary Judges Court as to adjusting the leases so as to exclude the valuable assets of Xstrata; try and keep the leases or modify them to exclude the Xstrata Land; or accept a long wait until the leases are awarded again.

This is all a bit of a mini disaster. The quick way out is to let Xstrata have a big chunk of Moolarben - the market seems to think this will cause Felix to be over $200 million worse off.

One good thing is that Xstrata are tied up in their bid for Lonmin, and Xstrata shares have fallen 35% from their high. Xstrata are having to raise cash to bid for Lonmin and may not be in a position to bid for Felix Resources.

 

[Quillan]

As a long-term Felix shareholder I think most people are being a little short sighted about the Moolarben issue.Besides Flannery says the Judgement may only affect 5mt of reserves.
Let's focus on this year's profits.
Anyone who has not heard Flannery's speech at the Miners' Club on 4th July should go to the Felix Website and click on Boardroom Radio.He discloses things not released to shareholders.For instance, this year FLX will sell 3mt of PCI coals at $240--$260 a tonne, and 2mt of Thermal at what we must assume is $125 a tonne, since that was the contract price agreed by the coal companies in April.
So turnover should be USD$1 billion, which equates to about AUD$1.1bn Deduct AUD$200m for extraction costs and company expenses gives AUD$900m before tax. Allow for a 30% Tax charge, gives a possible net profit of AUD$630m which gives EPS of AUD$3.2.[196m shares in issue.]
Next question. What would be an appropriate Historic PE in 12 month's time? A minimum of 15 gives a share price of $48 on my figures.
But in 12 months there will be the prospect of Moolarben within the near future, hopefully, which should enhance the Historic PE valuation to maybe as high as 25, plus the added 1.1mt of PCI from Yarrabee.[See below]
There is great speculation on next April's contract price for Thermal coals. Since PCI coal is in great demand, some thermal coals are suitable for upgrading to PCIs by washing. The only figure I have found for washing costs is AUD3.30 per tonne, quoted in India.Say it was $5 a tonne. $125 Thermal coal suddenly becomes $250 PCI coal !!
This is why FLX is saying Yarrabee will increase production of PCI coals to 2.8mt in 2009-2010. Assuming still we are talking $250 a tonne, that extra 1.1mt is worth in the region of AUD$15 to the share price !! That means today's share price is covered by this 1.1mt alone.
More coals converted to PCI means a greater shortage of Thermal.That's one reason why there are forecasts of USD$150-$180 per tonne for Thermal contracts next April.
What are the odds of an attack on Iran? There is a Bill already drawn up with an overwhelming number of supporting Republican signatures, which may be passed in the next month to allow Bush to act.
End September is crucial as there will be bad financial news coming out of the US by then. Nothing like a war to divert attention. Most important of all, the US is run by Big Business. When people like Cheney says "jump", Bush jumps.The Kissingers and Cheneys want an Iran scrap, so does Israel, but Bush must get it going before October. There's little chance Obama would start a war with Iran.
Iran would then close the Straits of Hormuz to all shipping,maybe by sinking a couple of large freighters, and all the pundits say oil would be more than $200 a barrel.Of course coal prices would follow suit.
Whether Bush is right or wrong in believing Iran is a nuclear threat is not the point.The point is the effect it would have on the FLX share price.
What could upset all these figures is the state of the world economy. The question being whether China, India, Japan and Korea will continue their insatiable need for energy, or will they slow down if the recession is deep-seated?
That's the balance we have to judge.
I say we don't need the circling Hyenas who are just trying to pick off juicy bits of the FLX portfolio.They are all "juicy"!! I haven't even mentioned HarryBrandt, Clean Coal Technology, Way Linggo,[?] or South Australia, plus the value of the 15% of the new Newcastle port facility, which Xstrata would love to get its hands on, or Moolarben. All these are in the share price for less than nothing !! If my figures for 2008 --2009 are about right, then FLX selling on a Prospective 2008-09 PE of under 5!!
No wonder the Hyenas are circling !!

 

[noirua]

Hi Quillan et al, There is the matter of royalties to take into account. On Queensland production 5% on the first $100 per tonne and 7% after this. The rate is 5% to 7% for NSW depending on whether the mine is open-cast or at what depth.
The benchmark thermal coal price is set at US$125 per tonne as you say but I believe talks are not yet finalised on semi-soft coking coal yet.
Felix coal from Minerva sells at about US$5 below the benchmark price. The Yarrabee mine is due to complete its new washery in early 2009 and still needs Queensland State approval to increase PCI coal mined.
Much of Moolarben's thermal coal from the open-cut mines will be lower grade thermal and will be supplied to a new Hunter Valley power station.

Xstrata finished their production at the Ulan open-cut mine six weeks ago and all the equipment is now on a care and maintenance basis and stored on the Ulan tenement which is a question of the court case.
Felix and Xstrata could yet come to an agreement though I see no mention of it anywhere.

Felix will see some advantage in the tanking Aussie$ if it holds.
The thermal coal price is down to around US$154 per tonne out of Newcastle on Friday, about US$40 dollars down on the high six weeks ago.

Felix profit will rise a great deal in 2009 but the present 4.65 million tonnes of sales may not rise above 5.2million tonnes in Y/E 2009 as Yarrabee extra production will start in the second half. From shipping records out of Gladstone, Minerva coal sales in single ships are going well but rail problems from Yarrabee are restricting deliveries.

Felix have also sold 480,000 tonnes of thermal coal forward at only just over US$100 per tonne for delivery in 2009.

I can't see profits beyond the range $350 to $450 million for 2009, using my cost records out of the Ashton, Yarrabee and Minerva mines.

 

[Quillan]

Nice to meet you noirua. I can see from your previous contributions you are very knowledgeable in the Coal Market. Would it be impertinent to ask you to tell us more of your background? I reckon your postings carry much weight.You have scaled down my figures somewhat. That's what debate is about.
I see from the article in the Australian Financial Review today, that Vale of Brazil is in the driving seat to make a bid. Another top contender is un-named but one would think it may be Xstrata, due to the excellent fit, and the desire to get the 15% FLX Port facility in their hands. However, I have just read the latest in the AFR which says Xstrata is not in the talks, but Vale had raised AUD$13bn last month to use for a merger with Xstrata, which has now broken down
The AFR also mentions China's Shenua Energy, who are after NSW's generation assets?
Any comments from our sage? Yes, it's you noirua, I am referring to.
We need your wisdom !!
A minority shareholding is OK by me, as long as the management stays in control, and they keep a fair proportion of their shares, but my guess is a bid will not be at more than $25, unless there is a bid war.Nobody will want cash who has large CGT liabilities, but who wants Brazilian Paper? I realise Brazil is really booming and Vale is clearly a big player.
I would rather wait for 18 months and see how the profits roll out, and Moolarben comes on stream. In the AFR article it quotes FLX as saying the Moolarben start will NOT be delayed.

 

[noirua]

There are a lot of us long-term holders of Felix stock around the world. Some still in Canada and the States.

The Moolarben story is quite confused, but don't think Mr Brian Flannery is really on unfriendly terms with Xstrata, he has to put forward this image in supporting Felix.
The Aussie Director in charge of Xstrata holdings in Australia is a long-term colleague of Brian Flannery and they worked together for Ulan Coal. It was Brian Flannery who purchased the tenement, that we are in court over, for Ulan Coal, when it was part of White Mining.

I get the feeling that this is all part of a game at the moment with 69% of the stock in the hands of AMCI and former White Mining executives.

A thought only, that Xstrata might want to back their coal holdings in Australia into a quoted company ie Felix Resources. Perhaps naming it Xstrata Felix or perhaps XFR.
Xstrata have a battle in the UK in their bid for Lonmin and they're having to raise cash. So, raising more to bid for Felix may not be an option. Xstrata shares are very weak.

 

[noirua]

Information on Bloomberg does confirm their view that Cia. Vale do Rio Doce are about to bid for Felix Resources. Xstrata look out of the race now and they seem to have blown it, basically.


http://www.bloomberg.com/apps/news?pid=20601081&sid=aXtdFyUywDJw&refer=australia

 

[noirua]

Xstrata look out of the race now and they seem to have blown it, basically.

Xstrata, using terms from the old days, have proven themselves to be a tuppeny ha'penny outfit in the way they've dealt with Moolarben.

 

[michael_selway]

Information on Bloomberg does confirm their view that Cia. Vale do Rio Doce are about to bid for Felix Resources. Xstrata look out of the race now and they seem to have blown it, basically.

http://www.bloomberg.com/apps/news?pid=20601081&sid=aXtdFyUywDJw&refer=australia

Hm yep, very volatile in recent times, but still good imo

Date: 13/8/2008
Author: Gabriella Hold
Source: The Australian Financial Review --- Page: 5
Sharemarket analysts say that selecting specific stocks can be a better approachthan investing in a market sector. Out of the 10 best performers in PortfolioPartners' Emerging Shares Fund, five were from the base metals or energysectors. Resources have been an essential part of portfolio growth sincemid-2007. Fund managers expect long-term value in industrial stocks, even thoughinvestors may be shy of possible pain

Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 7.8 47.8 195.1 248.7
DPS 6.0 11.0 58.0 44.0

Felix Surges Amid Speculation Vale May Seek Takeover (Update2)

By Jesse Riseborough and Rebecca Keenan

Aug. 14 (Bloomberg) -- Felix Resources Ltd., the best performer on Australia's benchmark index this year, rose the most in four years in Sydney trading amid speculation Brazil's Cia. Vale do Rio Doce may seek a takeover.

Felix rose A$2.79, or 18 percent, to A$18.34 at the 4:10 p.m. Sydney time close on the Australian stock exchange, its biggest gain since August 2004. Vale and China's Shenhua Group Corp. may be studying bids for the Brisbane-based coal producer, the Australian Financial Review reported today in its Street Talk column, without citing anybody.

There's ``speculation that a bid may be pending for them by Vale,'' Jamie Spiteri, head dealer at Shaw Stockbroking Ltd. in Sydney, said by phone today.

Coal and iron ore producers have soared this year as rivals and steelmakers including ArcelorMittal and Posco bought mines or shares in producers to secure raw material supplies. Felix, which has a market value of A$3.5 billion ($3.1 billion), appointed advisers last month following takeover approaches from several unnamed companies.

``At this time the interest shown by parties remains preliminary, incomplete, non-binding and conditional,'' Felix said today in a statement.

Vale and Xstrata Plc may seek to buy Australian coal mines amid surging prices, ABN Amro Holdings NV said last month.

John Jackson, exploration manager of Vale's Australian unit, wasn't immediately available for comment when contacted at his Brisbane office.

 

[Quillan]

Re post #669.
Any of you go back to the 1980's, when obscure gold prospects and Ballymoney were the star hopes, or when the share price got down to the equivalent of about 5 cents? At that time I used to lunch regularly with Don O'Callaghan in London, on the Meekatharra expense account!!
Has anyone any word on Don. He wasn't too well the last time I heard, then he stopped answering my mails.
Noirua, please stop being so bashful and tell us how you are so well informed, without giving away any confidences!!:bigun2:

 

[noirua]

Mr Travis Duncan, Chairman of Felix Resources is also a Director, previously Chairman, of White Energy (WEC). This company has a complex life in its previous mix with White Mining, now part of Felix Resources.

One of the interesting factors with WEC is its development of new technology for upgrading sub-bitumous coals.
Felix have recently opened an office in Adelaide to advance their 3 to 4 billion tonnes of sub-bitumous coal reserves at their Phillipson Tenement in SA. The Ghan Railway runs straight through the reserves and on to Adelaide in the South and Darwin in the North.

White Energy: http://www.whiteenergyco.com.au

The Benchmark thermal coal price rose $7.74 to US$163.90 on Friday 15th August. This was after five weeks of straight falls.

 

[noirua]

From memory, I believe Meekatharra Minerals NL was born out of the company Meekatharra Central Gold NL who were delisted on 1/1/1944. There was a name change on 14/8/1980 to Meekatharra Minerals NL, not certain if there was another change in 1970 before that or not.

I am only an investor and have no contacts with anyone on the present Board of Directors or Management of Felix Resources.

I seem to remember seeing an obituary for Don O'Callaghan. Will check out and see what I can find for certain.

 

[noirua]

An SMH article that discusses the position of coal and possible bid scenarios for Felix Resources: http://business.smh.com.au/business/no-end-in-sight-t0-xstratas-coal-hunt-20080817-3x1b.html?page=1

 

[noirua]

Felix Annual Results show Gross profits up 411% at $254.3 million.

A 50 cent final dividend will be paid on 30/10/2008. Making 53 cents for the year against 6 cents paid in 2007.

 

[michael_selway]

Felix Annual Results show Gross profits up 411% at $254.3 million.

A 50 cent final dividend will be paid on 30/10/2008. Making 53 cents for the year against 6 cents paid in 2007.

Hm looks like it mayhave beat estimates, esp the dividend!

Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 7.8 47.8 202.9 248.7
DPS 6.0 11.0 57.0 44.0

Felix Resources (Felix) is pleased to announce its profit before tax for FY2008 was $254.3 million which is a 411% increase on FY2007. This resulted in an NPAT of $188.5 million (2007: $47.2 million).
This has been our best year by far with our attributable sales tonnage increasing by 24% to 4.6mt over FY2007 tonnage. With the current cash at bank of approximately $300 million, and a strong cash flow expected in FY2009 to fund the expansion of Yarrabee and Felix’s 80% share of Moolarben, the Board has declared a dividend of 50 cents per share franked to 30% payable on 31 October 2008 to shareholders registered on 15 October 2008

thx

MS

 

[pacestick]

The minister is changing the relevant legislation so it looks like Felix will gain from the change as the ministers intention in granting the mining lease was frustrated by ulkan/xstrata

 

[noirua]

The minister is changing the relevant legislation so it looks like Felix will gain from the change as the ministers intention in granting the mining lease was frustrated by ulkan/xstrata

The Moolarben development is presently mothballed and it may take up to 12 months before the matter is resolved.
This may mean the mine being put back to late 2010, instead of late 2009, and after the March 2010 opening of the extension to the Newcastle Port.

Felix are likely to push on and raise output from the Ashton Mine, that is selling mainly semi-soft coking coal. More thermal coal sales are likely from Ashton to make up for the shortfall from Moolarben in 2010.

Felix look likely to raise production to 5.2 million tonnes in 2009, thanks to Yarrabee increased production, from 4.6 million tonnes in 2008.
2010 is now likely to see production reduced from expectations to just 6 million tonnes. Increases coming from Ashton and Yarrabee.